Western Sanctions Escalate, SHFE Aluminum Bottoms Out and Rebounds [SMM Aluminum Futures Brief Review]

》Check SMM Aluminum Product Prices, Data, and Market Analysis

SMM, February 10:

Today, the most-traded SHFE aluminum 2503 contract opened at 20,530 yuan/mt, with a high of 20,600 yuan/mt and a low of 20,405 yuan/mt, closing at 20,550 yuan/mt, up 0.27%. Trading volume was 119,000 lots, and open interest was 169,000 lots.

SMM Comments: On the macro front, the EU's intensified sanctions and US tariff pressures are expected to cause structural adjustments in the global aluminum market in the short term. Continuous attention is needed on the trends of EU-US trade policies and changes in demand in major consumer markets. Fundamentals side, the pressure of aluminum supply resumption has re-emerged, with domestic aluminum operating capacity expected to rise slightly in February. The average spot price of alumina continues to weaken, driving aluminum costs further downward. Cost side, support continues to weaken, with aluminum costs already falling below 18,000 yuan/mt, and industry profits exceeding 2,700 yuan/mt. Inventory side, the market remains in a post-holiday inventory buildup phase, with inventories expected to increase rapidly during the week. Demand side, the operating rate of leading aluminum processing enterprises rose 5.7 percentage points WoW to 56.8%. Although it is currently the off-season, operating rates for aluminum plate/sheet, strip and foil, secondary alloy, and extrusion enterprises have all increased, particularly for top-tier automotive extrusion enterprises, which have accelerated their resumption of operations, providing support for demand. Additionally, due to financial constraints and fewer orders on hand before the holiday, extrusion enterprises stockpiled relatively less, which may lead to some stockpiling sentiment after the holiday. With the end of the Chinese New Year holiday, aluminum processing enterprises are gradually resuming operations, and the consumer market is expected to recover progressively. 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. SHFE aluminum is expected to remain under resistance at high levels in the short term.

Today, the most-traded alumina 2505 contract opened at 3,473 yuan/mt, with a high of 3,522 yuan/mt and a low of 3,445 yuan/mt, closing at 3,466 yuan/mt, down 0.91%. Trading volume was 147,000 lots, and open interest was 140,000 lots.

SMM Comments: Overall, in the short term, alumina operating capacity continues to increase, and the alumina spot market remains relatively loose compared to earlier periods, with spot transaction prices continuing to decline. There are no clear expectations for production cuts in the short term, and supply remains stable. However, some aluminum production cuts or technological transformation capacities in south-west China may gradually resume, leading to a slight recovery in demand. Nevertheless, this is unlikely to reverse the relatively loose alumina spot market. Further attention should be paid to bauxite prices and supply conditions.

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