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2.7 SMM Aluminum Morning Meeting Notes
Futures Market: Overnight, the most-traded SHFE aluminum 2503 contract opened at 20,350 yuan/mt, reaching a high of 20,430 yuan/mt and a low of 20,305 yuan/mt, and closed at 20,345 yuan/mt, up 10 yuan/mt or 0.05% from the previous close. On Thursday, LME aluminum opened at $2,620/mt, hit a high of $2,640/mt and a low of $2,608.5/mt, and closed at $2,625/mt, up $1/mt or 0.04%.
Macro: (1) Initial jobless claims in the US mildly increased last week, aligning with a gradual easing in the labour market. According to the US Department of Labor, seasonally adjusted initial claims for the week ending February 1 rose by 11,000 to 219,000, compared to an expected 213,000. (Bullish★) (2) On February 6 local time, the Bank of England announced a 25-basis-point interest rate cut, lowering the benchmark rate from 4.75% to 4.5%, in line with market expectations. This marks the third rate cut in the current easing cycle. (Bullish★)
(3) Ministry of Commerce spokesperson Yongqian He stated that China's consumer market remains resilient, with strong potential and vitality, and the fundamental trend of recovery and improvement has not changed. With the expansion of trade-in policies for consumer goods and the orderly implementation of various consumption promotion activities, the consumer market in Q1 is expected to maintain steady growth. (Bullish★)
Fundamentals: (1) Aluminum Production: SMM learned that several aluminum smelters in Sichuan are gradually resuming production. Enterprise A, which previously cut 20% of its capacity, has restarted operations during the Chinese New Year holiday and is now fully operational. Enterprise B, which previously cut 27% of its capacity, is gradually resuming production and is expected to be fully operational by the end of March. Enterprise C, which previously cut 25% of its capacity, plans to restart in batches and is expected to be fully operational by April-May. Enterprise D, which delayed its resumption due to high alumina costs after technological transformation, plans to restart the remaining capacity within the week and is expected to be fully operational by early March. (Bearish★) (2) Aluminum Billet Market: In terms of inventory, aluminum billet inventory in Guangdong stood at 122,800 mt, while Wuxi's inventory was 68,400 mt, with a combined increase of 5,200 mt. Post-holiday resumption of downstream profile enterprises is still ongoing, and domestic aluminum billet inventory continues to rise. Weak purchasing demand from suppliers has made it difficult to stand firm on quotes, leading to weak market sentiment. (Bearish★) (3) Aluminum Downstream Operating Rates: This week, the operating rate of leading domestic aluminum downstream processing enterprises significantly rebounded, up 5.7 percentage points WoW to 56.8%, mainly driven by post-Chinese New Year resumption. The short-term trend is expected to continue improving. (Bullish★)
Primary Aluminum Market: On Thursday, trading activity in the east China market improved compared to the previous day, with aluminum prices rebounding and trade activity picking up. However, as consumption from aluminum semis enterprises has not yet fully recovered, just-in-time procurement was mainly based on monthly average prices after the price rebound, limiting the upward space for premiums. SMM A00 aluminum ingot was quoted at 20,230 yuan/mt, up 90 yuan/mt from the previous day, with a discount of 40 yuan/mt to the SHFE aluminum 2502 contract, unchanged from the previous day. In central China, trading activity also improved yesterday, with some traders purchasing amid the discount trend, leading to better transactions compared to the previous day. However, downstream processing enterprises have not fully resumed operations, limiting demand recovery. SMM Central China A00 aluminum ingot was quoted at 20,100 yuan/mt, up 90 yuan/mt from the previous day, with actual transactions ranging from parity to a discount of 20 yuan/mt to SMM Central China prices.
Secondary Aluminum Raw Materials: Yesterday, aluminum scrap market prices slightly increased. Baled UBC aluminum scrap was quoted at 14,850-15,700 yuan/mt (excluding tax), while shredded aluminum tense scrap rose by 0-100 yuan/mt to 16,450-17,100 yuan/mt (liquid aluminum, excluding tax). Most aluminum scrap traders have not fully resumed operations, and downstream scrap-consuming enterprises are mainly digesting inventory, with normal procurement yet to recover. Overall market transactions remain limited. Under weak supply and demand, the short-term price difference between primary metal and scrap is expected to fluctuate.
Secondary Aluminum Alloy: On Thursday, secondary aluminum alloy prices remained stable. Domestically, SMM ADC12 prices were unchanged from the previous day at 21,000-21,200 yuan/mt. Although secondary aluminum plants have gradually resumed production, both upstream and downstream remain largely in a holiday mode, resulting in a relatively quiet market atmosphere. Manufacturers have not adjusted their quotes, maintaining a wait-and-see approach. While demand has not fully recovered, raw material costs continue to provide some support for ADC12 prices, which are expected to remain firm in the short term.
Summary: On the macro side, initial jobless claims in the US mildly increased last week, and the Bank of England announced a rate cut as expected. With no new tariff-related news, the market is broadly focused on the US January non-farm payrolls report to be released on Friday. If the data remains strong, it could further influence market expectations for future rate adjustments. Fundamentals side, several aluminum smelters in Sichuan are gradually resuming production, adding supply-side pressure. February's average spot alumina price is expected to decline significantly, weakening cost-side support. On the demand side, the market remains in the off-season, but with the end of the Chinese New Year holiday, aluminum processing enterprises are gradually resuming operations, and downstream weekly operating rates have significantly rebounded, indicating improving consumption. In the short term, aluminum prices are expected to fluctuate, with key focus on US economic data, post-holiday inventory performance, and downstream resumption pace.
[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make prudent decisions and not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM.]
