Trump's Tariff Stick Takes Effect, SHFE Aluminum May Face Pressure at High Levels [SMM Aluminum Morning Meeting Summary]

》Click to View the SMM Aluminum Industry Chain Database

》Subscribe to Access SMM Historical Spot Metal Prices

Feb 10 SMM Aluminum Morning Meeting Notes

Futures Market: The most-traded SHFE aluminum 2503 contract opened at 20,530 yuan/mt overnight, hitting a high of 20,600 yuan/mt and a low of 20,515 yuan/mt, before closing at 20,535 yuan/mt, up 40 yuan/mt or 0.20% from the previous close. Last Friday, LME aluminum opened at $2,623/mt, reached a high of $2,651/mt and a low of $2,621.5/mt, and closed at $2,628/mt, up $3/mt or 0.11%.

Macro: (1) Trump announced early this morning that a 25% tariff will be imposed on all steel and aluminum entering the US on Monday, with reciprocal tariffs to be announced on Tuesday or Wednesday. (Bearish★★) (2) The US seasonally adjusted non-farm payrolls for January recorded 143,000, the lowest since October last year, while the unemployment rate stood at 4.0%, the lowest since May last year, both below expectations. (Bullish★) (3) National Bureau of Statistics (NBS): In January, CPI rose 0.5% YoY, while PPI fell 2.3% YoY. (Neutral) 

Fundamentals: (1) According to SMM statistics, the operating rate of the aluminum plate/sheet and strip sector in January 2025 was 68.70%, up 4.07 percentage points YoY and 2.16 percentage points MoM. The operating rate of the aluminum foil sector was 71.99%, up 10.53 percentage points MoM and 4.33 percentage points YoY. (Bullish★★) (2) According to SMM statistics, as of February 7, aluminum ingot inventories stood at 182,300 mt in Guangdong, 261,000 mt in Wuxi, and 97,500 mt in Gongyi, with total inventories increasing by 17,800 mt compared to the previous trading day. (Bearish★★) (3) Regarding domestic aluminum billet inventories, Guangdong recorded 126,300 mt, Wuxi 67,200 mt, with a total increase of 2,300 mt. (Bearish★)

Primary Aluminum Market: Last Friday morning, the front-month SHFE aluminum contract saw its center steadily rise. In east China, under the weekend effect, just-in-time procurement by downstream processing enterprises improved. Despite the upward shift in aluminum prices, market activity continued to rebound. Additionally, with the widening spread between futures and spot prices, traders' purchasing enthusiasm increased, supporting firm premiums. SMM A00 aluminum ingot was quoted at 20,470 yuan/mt, up 240 yuan/mt from the previous trading day, with a discount of 40 yuan/mt against the SHFE 2502 contract, unchanged from the previous trading day. In central China, the market was similarly boosted by the weekend effect, as downstream enterprises gradually resumed operations. Although aluminum prices continued to rise, traders remained firm on quotes. Last Friday, the price spread between Henan and Shanghai stood at a discount of 130 yuan/mt, unchanged from the previous trading day. SMM Central China A00 aluminum ingot was quoted at 20,340 yuan/mt, up 240 yuan/mt from the previous trading day, with actual transactions ranging from parity to a discount of 10 yuan/mt against SMM Central China prices.

Secondary Aluminum Raw Materials: Last Friday, aluminum prices continued to rebound, with aluminum scrap market quotes rising accordingly. Baled UBC aluminum scrap increased by 100 yuan/mt to 14,850-15,800 yuan/mt (excluding tax), while shredded aluminum tense scrap was quoted at 16,450-17,100 yuan/mt (liquid aluminum, excluding tax). Currently, most aluminum scrap traders have not resumed operations, and downstream scrap-consuming enterprises are primarily digesting inventories, 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 within a narrow range.

Secondary Aluminum Alloy: Last Friday, SMM ADC12 prices rose by 100 yuan/mt from the previous day to 21,100-21,300 yuan/mt. On the import side, overseas prices for imported ADC12 remained stable at $2,420-2,450/mt. With domestic prices rising, the immediate loss on imported ADC12 turned into a slight profit. The secondary aluminum market is in a recovery phase. Although overall trading volume remains insufficient, the upward trend in aluminum prices, coupled with tight market liquidity, has driven rapid increases in aluminum scrap procurement quotes, raising raw material costs and pushing up ADC12 prices. In the short term, ADC12 prices are expected to remain stable with a slight upward trend.

Summary: On the macro front, intensified EU sanctions and US tariff pressures are expected to cause structural adjustments in the global aluminum market in the short term. Continued attention is needed on changes in trade policies in Europe and the US, as well as demand trends in major consumer markets. On the fundamentals side, the pressure of resumed production in the aluminum supply chain has re-emerged, with domestic operating capacity of aluminum expected to rise slowly in February. The average spot price of alumina continues to weaken, driving aluminum costs further downward. As of now, aluminum costs have fallen below 18,000 yuan/mt, with industry profits exceeding 2,700 yuan/mt. On the inventory side, post-holiday inventory buildup continues, with inventories expected to increase rapidly during the week. On the demand side, the operating rate of leading aluminum processing enterprises rose by 5.7 percentage points WoW to 56.8% this week. Although it is currently the off-season, operating rates for aluminum plate/sheet, strip and foil, secondary alloy, and extrusion enterprises have all increased, especially among top-tier automotive extrusion enterprises, which are accelerating their resumption of work, providing support for demand. Additionally, due to financial constraints and limited orders on hand before the holiday, stockpiling was relatively low, which may lead to some stockpiling sentiment after the holiday. As the Chinese New Year holiday ends, aluminum processing enterprises are gradually resuming operations, and the consumer market is expected to recover. In the near term, focus should be on the impact of tariff events, post-holiday aluminum ingot inventory changes, and the pace of downstream resumption of work. SHFE aluminum is expected to remain under pressure at high levels in the short term.

[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make cautious decisions and not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM.]