Market Risk Aversion Sentiment Intensifies; Focus on U.S. Inflation Data This Week [SMM Aluminum Morning Meeting Summary]

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3.11 SMM Aluminum Morning Meeting Summary

Futures: Overnight, the most-traded SHFE aluminum 2504 contract opened at 20,905 yuan/mt, hitting a high of 20,925 yuan/mt and a low of 20,855 yuan/mt, before closing at 20,875 yuan/mt, up 5 yuan/mt or 0.02%. On Tuesday, LME aluminum opened at $2,695/mt, reached a high of $2,707.5/mt and a low of $2,683.5/mt, and closed at $2,686.5/mt, down $2.5/mt or 0.09%.

Macro: (1) Morgan Stanley predicts that due to the negative impact of tariffs and a tight labour market driving inflation higher, the US GDP growth rate will decline, with the 2025 GDP growth forecast revised down from 1.9% to 1.5%, and the 2026 forecast lowered from 1.3% to 1.2%. Morgan Stanley expects the US Fed to cut interest rates by 25 basis points only once more in June 2025, with two additional cuts expected starting in 2026, later than market expectations. (Bearish★) (2) Canada's Prime Minister-designate Mark Carney stated that as long as US President Trump continues the trade war, Canada will maintain retaliatory tariffs on US products. Ontario has imposed a 25% surcharge on electricity exports to the US. (Bearish★) (3) Data from the Passenger Car Association on March 10 showed that February retail sales in the national passenger car market reached 1.386 million units, up 26.0% YoY; cumulative retail sales for January-February totaled 3.179 million units, up 1.2% YoY. February retail sales were at historical highs for the month, and January-February sales returned to positive growth, showing strong market performance. (Bullish★)

Fundamentals: (1) According to SMM data, as of March 10, 2025, domestic aluminum ingot and billet social inventories plunged by 29,000 mt to 1.171 million mt. On a YoY basis, the degree of destocking in the fifth week after the holiday was second only to the same period in 2021. After the weekend, both aluminum ingot and billet inventories declined, laying a solid foundation for domestic aluminum inventory to enter a continuous destocking phase. The early March inventory total of 1.2 million mt may become the annual peak and a turning point. (Bullish★) (2) US Commerce Secretary Howard Lutnick confirmed over the weekend that the "aluminum and steel tariffs" will proceed as scheduled. He expects the 25% tariffs on steel and aluminum imports, originally set to take effect on Wednesday (12th), to be implemented as planned. According to customs data, in 2024, China's direct exports to the US accounted for only 4.1% of the total, while aluminum product exports to the US accounted for 16.5% of the total. This indicates that the policy has limited impact on China's direct export volumes, but caution is needed regarding the risk of declining US demand and weakening exports from Canada and Mexico, which may indirectly affect demand for Chinese aluminum products. (Bearish★)

Primary Aluminum Market: On Monday morning, the SHFE front-month aluminum contract continued to fluctuate at highs, with downstream buyers adopting a wait-and-see approach and purchasing cautiously. Transactions among traders were moderate. Additionally, in central China, downstream demand decreased due to production restrictions. Specifically, trading activity in east China was average, with downstream buyers purchasing as needed due to high prices. Spot discounts remained unchanged from the previous trading day. Yesterday, SMM A00 aluminum recorded a discount of 50 yuan/mt against the SHFE aluminum 2503 contract, with A00 aluminum ingot prices at 20,770 yuan/mt, down 70 yuan/mt from the previous trading day. In the central China market, transactions were average yesterday, mainly due to high aluminum prices and reduced downstream demand caused by policy-driven production restrictions. Transactions were mostly at a discount of 10 yuan/mt against central China prices. SMM central China A00 aluminum recorded 20,640 yuan/mt against the SHFE aluminum 2503 contract, down 80 yuan/mt from the previous trading day, with the Henan-Shanghai price spread at -130 yuan/mt, unchanged. While inventories in major consumption areas continued to decline, downstream buyers were cautious due to high absolute prices, limiting upward momentum for spot premiums and discounts. Spot premiums and discounts are expected to remain stable this week.

Secondary Aluminum Raw Materials: On Monday, aluminum scrap prices fluctuated rangebound following aluminum prices. Recently, aluminum shavings and baled UBC have been in tight supply in some regions, pushing prices higher. On Monday, baled UBC aluminum scrap was quoted at 15,300-16,100 yuan/mt (excluding tax), while shredded aluminum tense scrap was quoted at 16,450-17,950 yuan/mt (excluding tax). In the short term, pressure on aluminum scrap procurement has eased, but due to moderate downstream demand and high prices for both primary and aluminum scrap, the market shows no signs of improvement. Aluminum scrap prices are likely to fluctuate rangebound in line with primary aluminum.

Secondary Aluminum Alloy: Yesterday, aluminum prices edged lower, while secondary aluminum prices remained stable. Current market demand is weaker than expected, with slow recovery in orders, limiting the upside room for ADC12 prices. As raw material market liquidity improves, cost-side support is weakening. If the recovery in end-use consumption lacks sustainability and cost support further diminishes, ADC12 prices may face downward pressure.

Summary: On the macro front, endless tariff disputes have raised concerns about a potential US economic recession. The market is also focused on the US Consumer Price Index data to be released on Wednesday and the Producer Price Index data on Thursday. Traders have fully priced in the possibility of a US Fed rate cut in June. Fundamentals side, domestic aluminum production is advancing, with capacity expected to be released by the end of March. On the inventory side, domestic aluminum ingot inventories declined again after the weekend, making the turning point for destocking more evident. Coupled with the "Golden March and Silver April" peak season, operating rates at aluminum processing enterprises continue to rise, strengthening support for aluminum consumption. Overall, the macro front presents a mixed picture, with domestic macroeconomic benefits remaining intact, while overseas trade barriers increase but with high uncertainty. Fundamentals show growth in both supply and demand. As the consumption peak season approaches, most sectors are seeing a rebound in orders and operating rates, along with declining aluminum ingot social inventories, providing some support for aluminum prices. In the short term, aluminum prices are expected to hover at highs, with attention on the key resistance level of 21,000 yuan/mt.

【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 not related to SMM.】