Market Review: Aluminum prices moved up in March on macro tailwinds and demand recovery

During Mar 12-Apr 10, the most-traded SHFE aluminum contract moved in a narrow range, hitting a monthly low and high at 19,105 yuan/mt and 20,450 yuan/mt respectively before closing at 20,505 yuan/mt as of Apr 10, up 1,305 yuan/mt or 6.8% on the month. LME aluminum moved between $2,240-2,470/mt, and traded at $2,475.5/mt as of CST 15:00 Apr 10, up $232.5/mt, or 10.37%.

In terms of spot goods: According to SMM data, the average spot price of SMM A00 aluminum in March recorded at 19,197 yuan/mt, up 2.01% MoM, and the spot premium of SMM A00 aluminum recorded at -47 yuan/mt, down 327.27% MoM. The inventories were lower than in previous years, and the supply shortage was not prominent. SMM A00 aluminum price rose to 19,100-20,200 yuan/mt amid positive macro front. However, high aluminum prices discouraged downstream enterprises from buying and hindered destocking, pressuring the spot premium and discount. SMM A00 aluminum mainly maintained discounts.

Spot transactions of aluminum in east China were stable, with spot price premiums and discounts moving rangebound between a discount of 110 yuan/mt to a premium of 30 yuan/mt. Inventory performance in central China outperformed than that in east China and south China. Due to aluminum ingots destocking, the spot discounts widened and then narrowed. However, high aluminum prices discouraged downstream enterprises from buying and large discounts persisted. Initially, imported supplies led to inventory growth, and the downstream buyers made limited purchases, widening discounts. Later, the import window was closed, affecting the import supply. Aluminum ingot holders held offers firm amid traditional peak season, and the spot discount narrowed rapidly.

Heading into April, SHFE front-month aluminum contract was in backwardation structure, and the discounts narrowed due to the destocking. However, the downstream enthusiasm for restocking at high prices was relatively weak. Spot discounts may hardly recover to zero amid ample supply. It is expected that the discounts will persist in April, but may be improved compared with March.