Expectations of Interest Rate Cuts Cause Chain Disturbances, SHFE Aluminum Ultimately Remains Stable Last Night [SMM Aluminum Morning Meeting Summary]

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February 13, SMM Aluminum Morning Meeting Summary

Futures Market: Overnight, the SHFE aluminum 2503 contract opened at 20,530 yuan/mt, with a high of 20,590 yuan/mt and a low of 20,490 yuan/mt, closing at 20,585 yuan/mt, flat from the previous day. Yesterday, LME aluminum opened at $2,635.5/mt, with a high of $2,637.5/mt and a low of $2,607/mt, closing at $2,626/mt, down $12.5/mt or 0.47%.

Macro Front: (1) US January CPI data exceeded expectations across the board, prompting short-term rate futures traders to reduce the US Fed's expected rate cut this year to about 26 basis points. (Bearish★★) (2) Trump: May sign a reciprocal tariff executive order on Wednesday local time. Before Powell's speech, Trump urged the US Fed to cut interest rates, stating that this move would complement the upcoming tariff policy. (Bullish★) (3) Powell's second-day testimony: Latest data shows inflationary pressures easing but still not meeting targets; expressed some concerns about Treasury liquidity; balance sheet reduction still has a long way to go; the US Fed may need to adjust rates in response to tariff policies. (Bullish★) 

Fundamentals Side: (1) According to SMM statistics, as of February 12, aluminum ingot inventories in Guangdong were 202,400 mt; in Wuxi, 286,700 mt; and in Gongyi, 120,000 mt, with a total increase of 8,000 mt compared to the previous trading day. (Bearish★★) (2) For domestic aluminum billet inventories, Guangdong recorded 139,000 mt, and Wuxi recorded 64,300 mt, with a total increase of 2,400 mt. (Bearish★) (3) Approval was granted for Chalco Logistics Group Central International Land Port Co., Ltd. to become a group delivery warehouse for copper, aluminum, and alumina futures. The first storage location is at No. 17 Xin'an Road, Shangjie District, Zhengzhou, Henan Province, with a certified capacity of 150,000 mt for alumina and 50,000 mt for aluminum. No regional premiums or discounts are set for alumina, while aluminum has a regional discount of 120 yuan. The second location is at No. 118 Tangnan Road, Liangxi District, Wuxi, Jiangsu Province, with a certified capacity of 10,000 mt for aluminum and 5,000 mt for copper, with no regional premiums or discounts for either. (Neutral)

Primary Aluminum Market: Yesterday morning, the SHFE aluminum front-month contract saw its center slightly shift downward, with market trading activity gradually recovering. After the price correction, transactions slightly improved. Specifically, trading in east China was favorable, and spot discounts narrowed. SMM A00 aluminum recorded a discount of 30 yuan/mt against the SHFE aluminum 2502 contract, narrowing by 10 yuan/mt compared to the previous trading day. SMM A00 aluminum ingot was recorded at 20,540 yuan/mt, down 50 yuan/mt from the previous trading day. In the central China market, overall market activity has yet to fully recover, with spot discounts narrowing. Actual market transactions were mainly at a discount of 10 yuan/mt against SMM Central China prices. Yesterday, the Henan-Shanghai price spread was around a discount of 180 yuan/mt. SMM Central China A00 aluminum recorded 20,390 yuan/mt, down 50 yuan/mt from the previous trading day.

Secondary Aluminum Raw Materials: Suppliers gradually resumed work and production, with market activity improving compared to last week. Yesterday, baled UBC aluminum scrap was quoted at 15,150-15,900 yuan/mt (excluding tax), and shredded aluminum tense scrap was quoted at 16,650-17,950 yuan/mt (liquid aluminum, excluding tax). In the short term, the fundamentals of aluminum scrap remain weak on both supply and demand sides. Currently, aluminum scrap traders are gradually resuming operations, downstream purchasing as needed, and market transactions are improving. The short-term price difference between primary metal and scrap is expected to fluctuate.

Secondary Aluminum Alloy: Domestically, SMM ADC12 prices remained stable at 21,200-21,400 yuan/mt. In the import market, overseas ADC12 prices were in the range of $2,420-2,460/mt, with immediate import ADC12 profitability remaining slightly positive. This week, the secondary aluminum market continued its recovery phase, with secondary aluminum plants' operating rates gradually returning to normal levels. The accelerated pace of upstream and downstream resumption of work boosted market trading activity, and manufacturers' raw material procurement activities also gradually resumed. Supported by costs and driven by demand recovery, coupled with limited import supply, ADC12 prices are expected to continue fluctuating upward in the short term.

Summary: On the macro front, after the release of January CPI data that exceeded expectations across the board, the US dollar index rose briefly but ultimately closed up 0.05% at 107.98, as Trump may soon sign a reciprocal tariff executive order. EU sanctions intensified, and US tariffs exerted pressure, leading to potential structural adjustments in the global aluminum market in the short term. Continuous attention is needed on changes in US-EU trade policies and demand trends in major consumer markets. On the fundamentals side, the supply side of aluminum faces renewed pressure from production resumption, with domestic operating capacity expected to rise slowly in February. Alumina average spot prices continued to weaken, driving aluminum costs further downward. As of now, aluminum costs have fallen below 17,200 yuan/mt, with industry profits exceeding 3,300 yuan/mt. On the inventory side, post-holiday inventory buildup continues, with inventories expected to increase rapidly during the week. On the demand side, this week, operating rates of leading aluminum processing enterprises rose by 5.7 percentage points WoW to 56.8%. Although it is currently the off-season, operating rates of aluminum plate/sheet, strip and foil, secondary alloy, and extrusion enterprises have all increased, especially for automotive extrusion top-tier enterprises, which have accelerated 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. After the holiday, there may be some stockpiling sentiment. With the end of the Chinese New Year holiday, aluminum processing enterprises are gradually resuming work and production, and the consumer side is expected to recover gradually. In the near term, focus 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 fluctuate at highs 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.】