SMM Aluminum Market Morning Comment (May 31)

Overnight, the most-traded SHFE 2407 aluminum contract opened at 21,360 yuan/mt, reaching a high of 21,540 yuan/mt and a low of 21,280 yuan/mt, and closed at 21,460 yuan/mt, down 280 yuan/mt, a decrease of 1.29%. On the previous trading day, LME aluminum opened at $2,787.5/mt, reached a high of $2,799/mt and a low of $2,683/mt, and closed at $2,705/mt, down $89/mt, a decrease of 3.19%.

On the macro front, the IMF recently raised its forecast for China's economic growth this year, and US GDP data has renewed market confidence in rate cuts, leading to a decline in the US dollar index. The State Council issued the "Action Plan" to guide the optimization of the aluminum industry's capacity, achieving high-quality development, and multiple favorable factors boosted aluminum prices. On the fundamentals, domestic aluminum operating capacity mainly maintained an upward trend during the week, with good progress in the production resumption in Yunnan, which may be completed in June. Supply pressure may gradually emerge, with social inventory of aluminum ingots continuously growing. High aluminum prices inhibited inventory consumption, while LME aluminum inventory slightly declined from its peak. From the demand, recent aluminum prices hit a record high for the year and have been highly volatile, inhibiting downstream procurement enthusiasm, leading to a reduction in orders and operating rates for aluminum processing enterprises, and PMI has fallen below 50%. Additionally, as it is currently the transition period between peak and off-peak seasons, many enterprises have seen a slight decline in orders, and the overall operating rate is expected to weaken. During the week, spot alumina prices continued to rise, domestic aluminum costs continued to climb, and the import window remained closed, which may provide some support for aluminum prices. SMM expects aluminum prices to maintain a wide fluctuation, with strong market sentiment for capital chasing. We need to pay attention to the risk of price volatility after aluminum prices hit new highs.