Macro front, the US tariff hike policy has been implemented. On February 1, Trump signed an executive order imposing a 10% tariff on goods from China. China has filed a complaint with the WTO dispute settlement mechanism and will take corresponding countermeasures. The US Fed paused interest rate cuts in January, maintaining the federal funds rate target range at 4.25%-4.50%, in line with widespread expectations. The US January ISM Non-Manufacturing PMI recorded 52.8, significantly below the expected 54.3. The US January ADP employment figure reached 183,000, the highest since October last year. US data released on Wednesday showed mixed results, and the US dollar index continued to decline, providing some short-term support for aluminum prices.
Fundamentals side, entering February 2025, several aluminum smelters in Sichuan are gradually resuming production after the holiday, with a slow increase in domestic aluminum operating capacity expected. As some aluminum production cuts or technological transformation capacities in south-west China gradually resume, alumina demand slightly rebounds but is unlikely to reverse the relatively loose alumina spot market. In the short term, no clear expectations for alumina production cuts have been heard, and with no reduction in supply, alumina operating capacity continues to rise. The alumina spot market remains relatively loose compared to earlier periods, and spot transaction prices continue to decline. As a result, the cost side of the aluminum industry may continue to fall, with the immediate full average cost of aluminum at approximately 17,900 yuan/mt, down 526 yuan/mt from the last week before the holiday. Inventory-wise, post-holiday inventory buildup aligns with expectations on the whole, with no YoY anomalies observed. However, the buildup volume and growth rate are both higher than the seven-year average, and this year's aluminum product inventory buildup is slightly higher, potentially exerting some pressure on post-holiday aluminum prices.
In summary, domestic aluminum market demand weakens, and LME aluminum fluctuated during the holiday. Macro perspective, the US Fed has no short-term plans for interest rate cuts, US economic growth slows, the Eurozone economy stagnates and continues to cut interest rates, and global economic recovery faces challenges. EU sanctions intensify, and US tariffs exert pressure. In the short term, the global aluminum market will undergo structural adjustments due to policy impacts, requiring continuous attention to changes in US and European trade policies and major consumer market demand. Fundamentals side, the pressure of aluminum supply resumption re-emerges, with domestic aluminum operating capacity expected to increase slowly in February. Alumina spot average prices are expected to drop significantly in February, driving aluminum costs to continue their downward trend, weakening cost-side support further. Demand side, it remains the off-season, but with the end of the Chinese New Year holiday, aluminum processing enterprises will gradually resume work and production, and the consumer side will gradually recover. In the short term, aluminum prices are expected to fluctuate downward, with a focus on the progress of tariff events, aluminum ingot inventory changes during the holiday, and the pace of downstream resumption after the holiday. The most-traded SHFE aluminum contract is expected to operate around 19,700-20,550 yuan/mt next week, while LME aluminum is expected to operate around $2,550-2,670/mt.
