Post-Holiday Consumption Expectations Remain Optimistic, SHFE Aluminum Continues to Fluctuate at Highs [SMM Aluminum Morning Meeting Summary]

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February 11, SMM Aluminum Morning Meeting Summary

Futures Market: Overnight, the most-traded SHFE aluminum 2503 contract opened at 20,585 yuan/mt, hitting a high of 20,745 yuan/mt and a low of 20,560 yuan/mt, before closing at 20,730 yuan/mt, up 225 yuan/mt or 1.10% from the previous close. Yesterday, LME aluminum opened at $2,643/mt, reached a high of $2,664.5/mt and a low of $2,614/mt, and closed at $2,661/mt, up $33/mt or 1.26%. Macro Front: (1) Trump announced a 25% tariff on all steel and aluminum imports to the US. In response, China's Ministry of Foreign Affairs stated that there are no winners in trade wars or tariff wars. (Bearish ★) (2) Hamas announced a delay in the exchange of detainees due to Israel's continued violations of the ceasefire agreement. Israeli Defense Minister Katz stated that this (Hamas delaying the release of hostages) is a complete violation of the ceasefire agreement and instructed the Israeli Defense Forces to prepare for any situation in Gaza, raising the military's alert level. (Bullish ★) (3) The State Council Executive Meeting discussed measures to boost consumption, approved the "2025 Action Plan for Stabilizing Foreign Investment," studied policies to address structural imbalances in key industries, and deliberated on the draft "National Development Planning Law of the People's Republic of China." (Bullish ★★) Fundamentals: (1) As of February 10, 2025, SMM statistics showed domestic aluminum ingot social inventory at 729,000 mt, with circulating aluminum inventory at 603,000 mt, up 75,000 mt or 11.5% from the first day after the holiday (February 5) and up 237,000 mt from pre-holiday levels (January 27). (Bearish ★★) (2) As of February 10, 2025, SMM statistics showed domestic aluminum billet social inventory at 294,500 mt, up 20,000 mt or 7.1% from the first day after the holiday (February 5) and up 71,000 mt from pre-holiday levels (January 27). (Bearish ★) (3) Outflows from warehouses during the Chinese New Year holiday (January 27-February 9) were 70,500 mt for aluminum ingots and 17,100 mt for aluminum billets, both slightly higher than the same period last year. (Bullish ★) Primary Aluminum Market: Yesterday morning, the SHFE front-month aluminum contract fluctuated, with prices rising significantly during the second trading session. In east China, trading activity continued to recover, primarily among traders. SMM learned that downstream demand in the region recovered slightly better than market expectations, supporting spot premiums/discounts. Yesterday, SMM A00 aluminum was at a discount of 40 yuan/mt against the SHFE 2502 contract, unchanged from the previous trading day. SMM A00 aluminum ingot was recorded at 20,410 yuan/mt, down 60 yuan/mt from the previous trading day. In central China, the market showed a weak supply-demand balance, with average terminal transactions and trading activity yet to recover. Some traders were inclined to stand firm on quotes, with actual transactions mainly at SMM Central China -10. Yesterday, the Henan-Shanghai price spread was around a discount of 130 yuan/mt. SMM Central China A00 aluminum was recorded at 20,280 yuan/mt, down 60 yuan/mt from the previous trading day. Secondary Aluminum Raw Materials: Yesterday, baled UBC aluminum scrap was quoted at 14,950-15,800 yuan/mt (tax excluded), while shredded aluminum tense scrap was quoted at 16,550-17,650 yuan/mt (liquid aluminum, tax excluded). In the short term, the aluminum scrap market remains in a weak supply-demand balance. Most aluminum scrap traders have not resumed operations, and downstream scrap users are primarily consuming inventory without resuming normal procurement. Overall market transactions were limited, and the price difference between primary metal and scrap is expected to fluctuate in the short term. Secondary Aluminum Alloy: Domestically, SMM ADC12 prices remained unchanged from the previous day at 21,100-21,300 yuan/mt. For imports, overseas ADC12 prices were stable at $2,420-2,450/mt, with slight profitability in spot imports. This week, the secondary aluminum market continued its recovery, with increasing transactions, though upstream and downstream activities have not returned to normal levels. In the short term, ADC12 prices are expected to adjust narrowly in line with A00 aluminum prices. Summary: On the macro front, intensified EU sanctions and US tariff pressures are expected to lead to structural adjustments in the global aluminum market in the short term. Continued attention is needed on trade policy developments in Europe and the US, as well as changes in demand in major consumer markets. China's Ministry of Foreign Affairs reiterated that there are no winners in trade wars or tariff wars, while the State Council Executive Meeting's discussions on boosting consumption provided some market confidence. On the fundamentals side, the resumption of aluminum production is putting renewed pressure on supply, with domestic operating capacity expected to rise slowly in February. Alumina average spot prices continued to weaken, driving aluminum costs lower. As of now, aluminum production costs have fallen below 18,000 yuan/mt, with industry profits exceeding 2,700 yuan/mt. In terms of inventory, post-holiday inventory buildup continues, with rapid increases expected this week. On the demand side, operating rates at 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 increased, particularly for automotive extrusion at top-tier enterprises, which are accelerating their resumption of operations, providing support for demand. Additionally, due to financial constraints and limited orders on hand before the holiday, stockpiling was relatively low. Post-holiday, there may be some stockpiling sentiment. As the Chinese New Year holiday ends, aluminum processing enterprises are gradually resuming operations, and demand is expected to recover. In the near term, focus on the impact of tariff events, post-holiday aluminum ingot inventory changes, and the pace of downstream resumption. SHFE aluminum is expected to continue fluctuating at highs in the short term.

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