Demand Rebounds, Alumina Fluctuates Upward, SHFE Aluminum Rises with Increased Positions [SMM Aluminum Futures Brief]

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

SMM, February 20:

Today, the most-traded SHFE aluminum 2504 contract opened at 20,715 yuan/mt, with a high of 20,875 yuan/mt and a low of 20,715 yuan/mt, closing at 20,830 yuan/mt, up 0.53%. Trading volume reached 95,000 lots, and open interest stood at 244,000 lots.

SMM Comments: Recently, the macro front and fundamentals side have shown a tug-of-war between longs and shorts. Several participants in the US Fed's January meeting minutes suggested that it might be appropriate to pause or slow down balance sheet reduction until the debt ceiling issue is resolved. Bostic stated that the Fed has made good progress in balance sheet reduction. Additionally, the EU approved a new round of sanctions against Russia. Domestically, macro policy expectations and hopes for consumption recovery provided underlying support. In Q2, with the arrival of the traditional consumption peak season and the release of policy dividends, five departments announced support for upgrading consumption of automotive products, electronic products, and home products, promoting the replacement of "energy" in vehicles, "intelligence" in home appliances, and "renewal" in home kitchen and bathroom products. Aluminum prices are expected to strengthen driven by demand recovery, but systemic risks from faster-than-expected tightening of overseas liquidity should be monitored. Fundamentals side, the aluminum supply side faces renewed pressure from resumed production, with domestic aluminum operating capacity expected to rise slightly in February. The average spot price of alumina continued to weaken, driving aluminum costs further downward, weakening cost-side support. Although both supply and demand are increasing and post-holiday demand recovery exceeded expectations, aluminum futures and spot prices have remained strong despite the lack of cost support. Inventory-wise, current domestic aluminum ingot inventory buildup slightly exceeded expectations, with inventory likely to surpass last year's level by the end of February. Q1 inventory peak may be revised upward to the range of 900,000-950,000 mt, making it difficult to provide further short-term support for aluminum prices. 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 resumption of work and production. Coupled with the approach of the traditional peak season in March, operating rates across 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 short term, with increasing PV demand and comprehensive resumption of work and production on the end-user side, while supply-side increments remain limited, aluminum prices are expected to maintain high-level fluctuations.

Today, the most-traded alumina 2505 contract opened at 3,440 yuan/mt, with a high of 3,477 yuan/mt and a low of 3,421 yuan/mt, closing at 3,466 yuan/mt, up 0.79%. Trading volume reached 76,000 lots, and open interest stood at 154,000 lots.

SMM Comments: On the supply side, some alumina refineries in north China recently conducted maintenance, which may cause short-term supply disruptions. However, with the gradual release of new capacity domestically and internationally, expectations of a supply surplus have been further reinforced. Demand side, aluminum enterprises in Sichuan and other regions are gradually resuming production, driving a recovery in alumina demand. Meanwhile, the opening of the alumina export window may lead some domestic supplies to flow into international markets, alleviating supply pressure. Cost side, the sharp decline in alumina prices has weakened bauxite demand, prompting holders to lower their quotes, with imported ore prices also declining in tandem, reducing production costs. Nevertheless, spot prices in north China remain below the theoretical cost line. Overall, current alumina prices may enter a phase of fluctuation and adjustment. Going forward, attention should be focused on the sustainability of the alumina export window and changes in operating capacity.

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