Supporting the Private Economy: The Tug-of-War Between Sellers and Buyers Continues Amid a Volatile Pattern [SMM Aluminum Morning Meeting Notes]

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2.18 SMM Aluminum Morning Meeting Notes

Futures Market: Yesterday, the most-traded SHFE aluminum 2504 contract opened at 20,645 yuan/mt, reached a high of 20,690 yuan/mt, a low of 20,585 yuan/mt, and closed at 20,660 yuan/mt, down 50 yuan/mt from the previous day, with a 0.24% increase. Yesterday, LME aluminum opened at $2,635/mt, hit a high of $2,651/mt, a low of $2,613/mt, and closed at $2,646.5/mt, up $9/mt, with a 0.34% increase.

Macro: (1) US Fed - Harker: The current economic situation supports temporarily maintaining stable interest rate policies; Bowman: Before another interest rate cut, stronger confidence in inflation decline is needed. Inflation is expected to decline, but upside risks remain. (Bearish ★) (2) Jinping Xi: The development prospects of the private economy are broad and promising, and it is the right time for private enterprises and entrepreneurs to showcase their capabilities. (Bullish ★★) (3) The 14th Session of the Standing Committee of the 14th National People's Congress will be held in Beijing from February 24 to 25 to review the draft law on promoting the private economy and the draft amendment to the Civil Aviation Law submitted by the State Council. (Bullish ★) 

Fundamentals: (1) According to SMM statistics, aluminum ingot outflows from warehouses totaled 100,500 mt during 2.11-2.16, an increase of 30,000 mt compared to the Chinese New Year holiday period. Aluminum billet outflows from warehouses totaled 44,200 mt during 2.11-2.16, an increase of 27,100 mt compared to the Chinese New Year holiday period. (Bullish ★) (2) On February 17, domestic mainstream consumption area aluminum ingot inventory stood at 818,000 mt, up 55,000 mt from last Thursday. (Bearish ★) (3) Domestic mainstream consumption area aluminum billet inventory reached 307,000 mt, up 6,600 mt from last Thursday. (Bearish ★)

Primary Aluminum Market: Yesterday morning, the most-traded SHFE aluminum contract center slightly shifted downward, fluctuating around 20,550 yuan/mt. In the east China market, aluminum prices rose to high levels, weakening downstream restocking sentiment, with most transactions being demand-driven. However, during the morning session, the SHFE aluminum front-month and next-month contract price spread fluctuated between C10 and B10, with traders standing firm on quotes, leaving limited room for downside in premiums. SMM A00 aluminum ingot was quoted at a discount of 50 yuan/mt to the SHFE aluminum 2502 contract, down 10 yuan/mt from the previous trading day. SMM A00 aluminum ingot recorded 20,540 yuan/mt, down 60 yuan/mt from the previous trading day.

Secondary Aluminum Raw Materials: Aluminum scrap market quotes slightly declined. Yesterday, baled UBC aluminum scrap quotes dropped by 0-50 yuan/mt to 15,150-15,950 yuan/mt (excluding tax), while shredded aluminum tense scrap quotes fell by 0-100 yuan/mt to 16,650-18,150 yuan/mt (liquid aluminum, excluding tax). In the short term, the aluminum scrap fundamentals are steadily recovering, with downstream procurement demand gradually picking up and market transactions continuing to improve. The short-term price difference between primary metal and scrap is expected to remain volatile.

Secondary Aluminum Alloy: Yesterday, secondary aluminum alloy prices remained stable. Domestically, SMM ADC12 prices held steady at 21,200-21,400 yuan/mt. In the import market, overseas ADC12 prices were in the range of $2,420-2,460/mt. Due to the strengthening of the yuan exchange rate, the immediate profit per ton for imported ADC12 expanded to over 200 yuan. With aluminum prices fluctuating within a narrow range, the secondary aluminum market showed little volatility, and manufacturers mostly maintained stable pricing. Recently, with traders resuming work and an increase in overseas imports, the circulation of aluminum scrap in the market has increased, slightly easing cost pressure for secondary aluminum plants, though costs remain high overall. Current downstream demand recovery is slightly slower than expected, which may limit the upside room for prices. In the short term, secondary aluminum alloy prices are expected to follow aluminum prices in narrow fluctuations.

Summary: Recently, macro factors have been mixed. Domestically, efforts to boost consumption continue, while overseas trade barriers are intensifying. However, domestic enterprises and market sentiment have shown limited response to this. In the short term, the global aluminum market is expected to undergo structural adjustments influenced by policies, and attention should be paid to changes in European and American trade policies and major consumer market demand. Fundamentals side, the pressure of resuming production in the aluminum supply side has re-emerged, with domestic operating capacity of aluminum expected to rise slowly in February. Alumina average spot prices continue to weaken, driving aluminum costs further downward, weakening cost-side support. Despite both supply and demand showing growth and post-holiday demand recovery exceeding expectations, aluminum futures and spot prices remain strong even as cost support diminishes. Inventory-wise, the market is still in a post-holiday inventory buildup phase, with inventories expected to continue rising rapidly this week. Demand side, the operating rate of leading domestic aluminum downstream processing enterprises significantly rebounded this week, up 5.7 percentage points WoW to 56.8%, mainly driven by post-Chinese New Year resumption of production. However, recovery across sectors remains uneven. In the future, with increasing PV demand and full resumption of production by end-users, and limited supply-side increments, aluminum prices are expected to maintain high-level fluctuations in the short term.

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