Alumina Struggles to Rebound, SHFE Aluminum Rises with Increased Positions [SMM Aluminum Futures Brief]

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

SMM, February 19:

Today, the most-traded SHFE aluminum 2504 contract opened at 20,730 yuan/mt, with a high of 20,750 yuan/mt, a low of 20,660 yuan/mt, and closed at 20,700 yuan/mt, down 0.17%. Trading volume was 53,000 lots, and open interest was 228,000 lots.

SMM Comments: Recently, macro factors have been continuously supportive. Overseas, measures related to tariffs and anti-dumping duties have been frequently introduced. Trump stated that the automobile tariff rate would be approximately 25%, and large enterprises in the chip and automobile sectors would return to the US. The European Commission will swiftly utilize trade protection measures, such as anti-dumping and countervailing duties, when necessary. Domestically, China's policy efforts are driving investment in emerging industries, supporting private enterprises to actively participate in the "implementation of major national strategies and the development of security capabilities in key areas" and the "program of large-scale equipment upgrades and consumer goods trade-ins." Efforts are also being made to resolve overdue payments to private enterprises and to revise and release a new version of the negative list for market access as soon as possible. The market remains optimistic about the medium and long-term outlook for aluminum consumption. However, in the short term, the global aluminum market will undergo structural adjustments due to policy impacts. Risks such as escalating overseas trade conflicts and persistently weak domestic demand dragging down aluminum consumption should be closely monitored. Fundamentals side, the pressure of aluminum supply resumption has re-emerged, with domestic aluminum operating capacity expected to increase slightly in February. The average spot price of alumina continues to weaken, driving aluminum costs further downward, with cost-side support continuing to weaken. Although both supply and demand are increasing and post-holiday demand recovery has exceeded expectations, aluminum futures and spot prices remain strong despite the lack of cost support. Inventory-wise, current domestic aluminum ingot inventory buildup slightly exceeds expectations, with inventory by the end of February likely to surpass the same period last year. The Q1 inventory peak may be revised upward to the range of 900,000-950,000 mt, making it difficult to provide support for further short-term aluminum price increases. Demand side, last week, the operating rate of leading domestic downstream aluminum processing enterprises maintained a recovery trend, up 4.1 percentage points WoW to 60.8%. After the Lantern Festival, aluminum processing enterprises accelerated their resumption of work and production. Coupled with the approach of the traditional peak season in March, operating rates in various sectors still have upside room. However, attention should be paid to the recovery of end-use consumption and changes in the export market. In the future, with the increase in PV demand and the comprehensive resumption of work and production at the end-user level, and given the limited supply-side increment, aluminum prices are expected to remain in a high-level fluctuation in the short term.

Today, the most-traded alumina 2505 contract opened at 3,420 yuan/mt, with a high of 3,435 yuan/mt, a low of 3,402 yuan/mt, and closed at 3,418 yuan/mt, down 0.06%. Trading volume was 44,000 lots, and open interest was 153,000 lots.

SMM Comments: In terms of supply, some alumina refineries in north China have recently undergone maintenance, which may slightly impact short-term supply. However, with the gradual release of new capacity domestically and internationally, the expectation of a market supply surplus has further intensified. On the demand side, aluminum enterprises in Sichuan and other regions are gradually resuming production, driving a rebound in alumina demand. Meanwhile, the opening of the alumina export window may lead some domestic supplies to flow into the international market, alleviating supply pressure. Cost side, the significant decline in alumina prices has weakened bauxite demand, leading holders to lower their quotations, with imported ore prices also declining, reducing production costs. Nevertheless, spot prices in north China remain below the theoretical cost line. Overall, the market has not yet seen large-scale production cuts, cost-side downward pressure persists, spot supply remains abundant, and prices are likely to remain under downward pressure 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.]