On the macro front, the central bank released China monetary policy report for Q1 2024 in the week, which researched on policies of digesting existing real estate and optimizing housing. Then, many places introduced policies to digest existing real estate. Overseas, the US core CPI fell to its lowest level in nearly three years, and expectations of a Fed rate cut arose again. The escalating conflict in the Red Sea lifted gold and commodities market. The macro front was bullish.
The domestic aluminum supply maintained an upward trend in the week. There was a small amount of production resumption in Yunnan. The domestic aluminum operating capacity was about 42.65 million mt. No new capacity were put into operation in Inner Mongolia and Guizhou. Aluminum billets factories in Guangxi restarted, but those in Qinghai cut output again. The proportion of aluminum liquid in the industry may pull back compared to April. Spot alumina prices continued to rise, boosting domestic aluminum costs. As of May 16, SMM estimates that the immediate cost of domestic aluminum was about 17,614 yuan/mt, up 109 yuan/mt WoW. The domestic aluminum real-time profits were about 3,066 yuan/mt, up 51 yuan/mt WoW. The import window remained closed in the week, there were very few quotations for imported aluminum ingots in the spot market, significantly affecting the supply. The bonded area inventory increased, but we still need to wait for the import window to open before customs clearance. Aluminum inventories in warehouses in Klang increased significantly. As of May 16, the total LME inventory reached 1.093 million mt, up 613,000 mt WoW, mainly contributed by warehouses in Klang. The total inventory hit a new high since October 2021. The operating rate of domestic downstream market stabilized in the week. Production of large and medium-sized enterprises improved, while the operating rate of small enterprises remained weak. Aluminum prices continued to go up, and downstream customers were unwilling to pick up goods. The finished product inventory of aluminum semis processing companies increased, and companies were under financial pressure. The US and Mexico announced additional tariffs on China's aluminum semis exports, somehow disrupting the orders of Chinese aluminum semis export companies. Spot aluminum market rose first and then fell in the week, with downstream companies purchasing on the dip. Domestic inventories destocking accelerated.
From a technical perspective, the model predicts that the price range of SMM A00 aluminum average price will be [20,280, 20,880], the price center will be 20,540, the unit is yuan/mt, the extreme price range will be [19,920, 21,210], the normal price range will be [20,160, 20,990], and the conservative price range will be [20,400, 20,770]. The price is expected to move sideways or swing on a soft note. The support range will be [20,160, 20,400], and the resistance range will be [20,770, 20,990]. The model predicts that the price range of the most-traded SHFE aluminium contract will be [20,205, 20,985], with the price center of 20,570, and the unit is yuan/mt. The extreme price range will be [19,820, 21,310], the normal price range will be [20,080, 21,090], and the conservative price range will be [20,330, 20,880]. The price is expected to move sideways or swing on a soft note. The support range will be [20,080, 20,330], and the resistance range will be [20,880, 21,090].
On the macro front, the US Consumer Price Index (CPI) in April recorded the first decline in six months, leading traders to increase their bets on future interest rate cuts by the Fed; the domestic Ministry of Finance issued ultra-long special government bonds, coupled with new policy directions for real estate and new energy vehicles, which may drive real economy development. Fundamentally, domestic aluminum operating capacity continued to increase, but the impact of imported primary aluminum decreased, and the inventory of spot aluminum ingots supported aluminum price. On the consumption, expansion of aluminum processing industry's production capacity led to fierce competition and declining processing fees. However, the total demand for aluminum continued to grow, policies in domestic real estate and automobile sectors were positive, and the market has good expectations for aluminum demand, supporting the tight balance of aluminum market. Amid bullish macro sentiment, coupled with the resilient support of domestic downstream consumption, aluminum prices are expected to be well supported. SMM predicts that most-traded SHFE aluminum will fluctuate at 20,080-21,090 yuan/mt this week, and LME aluminum may fluctuate at $2,500-2,680/mt. We will continue to pay attention to price difference between the domestic and overseas markets and domestic downstream operating rate.
