Macro front, overseas trade frictions intensified. Since Trump announced the tariff hike, the US Midwest premium has surged past $900/mt, significantly increasing end-user procurement costs. Trump granted a one-month tariff exemption for cars imported under the USMCA agreement and stated that his conversation with Trudeau ended "somewhat" amicably. Currently, the uncertainty of US tariff policies remains high, with a notable impact on prices. Domestically, the Two Sessions were held, outlining China's main development targets for 2025: GDP growth of around 5%, an urban surveyed unemployment rate of approximately 5.5%, over 12 million new urban jobs, and a consumer price index increase of about 2%. Additionally, "stabilizing the real estate and stock markets" was included for the first time in the general requirements of the Government Work Report. Overall, the domestic macro environment remains favourable, providing strong support for aluminum prices.
Fundamentals side, China's operating capacity of aluminum saw a slight increase, with production resumption plans in Sichuan, Guangxi, and Qinghai progressing steadily. Full capacity is expected to be operational by the end of March, and the contribution to production from the pots started in February will gradually materialize. On the cost side, the aluminum industry's costs slightly rebounded this week. As of Thursday, the domestic immediate full average cost of aluminum was approximately 17,446 yuan/mt, up 408 yuan/mt WoW. This was mainly due to stable alumina prices this week, while auxiliary material prices rose significantly, leading to a slight cost increase for aluminum. Demand side, domestic aluminum ingot inventory showed initial signs of destocking. According to SMM statistics, as of March 6, aluminum ingot inventory in major domestic consumption areas was 871,000 mt, down 15,000 mt from Monday. Additionally, with the peak season of "Golden March and Silver April" approaching, downstream aluminum processing enterprises saw a rebound in orders on hand and operating rates. Coupled with the surge in PV-related demand triggering a rush for installations in H1, component manufacturers increased their production schedules and procurement volumes, providing overall support for aluminum consumption.
In summary, the macro front presents a mix of bullish and bearish factors. Domestically, the favourable macro tone remains unchanged, while overseas trade barriers have increased but with high uncertainty, leaving the market in a state of contention. Fundamentals side, both supply and demand are on the rise. With the consumption peak season approaching, most sectors are experiencing a rebound in order volumes and operating rates. Combined with the initial signs of destocking in aluminum ingot social inventory, strong support is provided for aluminum prices. The most-traded SHFE aluminum contract is expected to trade around 20,500-21,200 yuan/mt next week, while LME aluminum is expected to trade around $2,650-2,730/mt.
