US Lifts 50% Tariffs on Canadian Steel and Aluminum, Overnight Aluminum Futures Rebound [SMM Aluminum Morning Brief]

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3.12 SMM Aluminum Morning Meeting Summary

Futures Market: Overnight, the most-traded SHFE aluminum 2504 contract opened at 20,880 yuan/mt, hitting a high of 20,910 yuan/mt and a low of 20,810 yuan/mt, before closing at 20,830 yuan/mt, up 75 yuan/mt or 0.36%. On Tuesday, LME aluminum opened at $2,685/mt, reached a high of $2,711/mt and a low of $2,669/mt, and closed at $2,704/mt, up $17.5/mt or 0.65%.

Macro Perspective: (1) The Party Committee of the China Securities Regulatory Commission held an expanded meeting to thoroughly study the important speeches of President Xi Jinping during the Two Sessions and the spirit of the Two Sessions, and to plan specific measures for implementing the capital market's development. The meeting emphasized fully consolidating the momentum of market recovery and improvement. (Bullish★) (2) US White House Trade Advisor Navarro stated on Tuesday afternoon that President Trump would not raise tariffs on Canadian steel and aluminum imports to 50% on Wednesday. This statement followed Trump's announcement of plans to double the 25% tariff on Canadian metals, in response to Ontario's 25% surcharge on US electricity (a decision that was canceled after Trump's threat). Ontario's surcharge was a countermeasure to Trump's 25% tariff on Canadian goods. Additionally, Navarro mentioned that the 25% tariff on all imported steel and aluminum would take effect at midnight on the 12th, with no exemptions. (Bearish★) (3) US January JOLTs job openings rose to 7.74 million, exceeding the expected 7.63 million. Subsequently, traders increased their bets on a US Fed interest rate cut. (Bullish★)

Fundamentals: (1) According to SMM statistics, as of March 11, aluminum ingot inventories were 267,900 mt in Guangdong, 321,200 mt in Wuxi, and 137,000 mt in Gongyi, totaling 726,100 mt, an increase of 800 mt from the previous trading day. (Bearish★) (2) On March 11, LME aluminum inventory stood at 502,150 mt, down 4,050 mt or 0.80% from the previous day. (Bullish★) (3) According to CAAM data, in February, automobile production and sales reached 2.103 million units and 2.129 million units, respectively. From January to February, China's automobile production and sales totaled 4.553 million units and 4.552 million units, up 16.2% and 13.1% YoY, respectively. During January-February, the new round of trade-in policy expansion and early implementation, along with enterprise technological upgrades and product renewals, stimulated demand, leading to steady growth in automobile production and sales. The strong start in the automotive industry laid a solid foundation for achieving a Q1 "good start." (Bullish★)

Primary Aluminum Market: On Tuesday morning, the front-month SHFE aluminum contract saw its center quickly shift downward, with active spot trading and buying the dip. Suppliers slightly stood firm on quotes. Specifically, in east China, trading among traders was active, and spot discounts narrowed by 10 yuan/mt compared to the previous trading day. On Tuesday, SMM A00 aluminum ingot recorded a discount of 40 yuan/mt against the SHFE aluminum 2503 contract, with SMM A00 aluminum ingot priced at 20,710 yuan/mt, down 60 yuan/mt from the previous trading day. In central China, trading activity among traders improved slightly, but downstream actual demand showed no significant improvement. SMM learned that aluminum processing plants in the surrounding areas had high inventories, and safety-related production restrictions further prompted downstream players to prioritize inventory digestion. On Tuesday, transactions in central China were mostly at a premium of 10 yuan/mt against SMM central China prices, with SMM central China A00 aluminum ingot priced at 20,600 yuan/mt, down 40 yuan/mt from the previous trading day. The price spread between Henan and Shanghai remained at -110 yuan/mt. In the short term, spot premiums and discounts may fluctuate rangebound.

Secondary Aluminum Raw Materials: On Tuesday, aluminum scrap market quotes generally followed aluminum prices, pulling back slightly. Downstream alloy plants maintained purchasing as needed due to lackluster demand. Baled UBC aluminum scrap was quoted at 15,300-16,050 yuan/mt (tax excluded), while shredded aluminum tense scrap was quoted at 16,450-17,950 yuan/mt (tax excluded). In the short term, domestic new scrap supply showed some improvement, but downstream demand remained weak, and with primary and aluminum scrap prices fluctuating at highs, downstream and end-use demand stayed subdued. Aluminum scrap prices may fluctuate rangebound along with primary aluminum.

Secondary Aluminum Alloy: On Tuesday, secondary aluminum prices remained stable overall. Domestic SMM ADC12 prices held steady at 21,200-21,400 yuan/mt, while overseas ADC12 prices remained firm at a high of around $2,500/mt. Instant import losses stayed at 200-300 yuan/mt, keeping the import window closed. As raw material market liquidity improves, cost-side support is weakening. If the recovery in end-use consumption lacks sustainability, combined with further loosening of cost support, ADC12 prices may face continued downward pressure.

Summary: Macro perspective, US tariff policies on major trading partners have caused significant market volatility and heightened concerns over economic growth. The US dollar index hit its lowest level since mid-October last year. The market will focus on the US Consumer Price Index on Wednesday and the Producer Price Index on Thursday, with traders currently expecting the US Fed to cut interest rates in June. Fundamentals side, domestic aluminum production resumption continues to advance. Weekly aluminum ingot social inventory remains on a destocking trend, making the destocking turning point increasingly clear. Coupled with the sustained recovery in aluminum processing enterprises' operating rates during the peak season, consumption-side support is strengthening. Overall, the macro perspective shows a tug-of-war between longs and shorts. Domestic pro-growth policies maintain a positive tone, while overseas trade barriers heighten market risk aversion. Fundamentals indicate a dual increase in supply and demand, with order recovery in multiple sectors driving downstream operating rates higher, supported by continued destocking of social inventories, which provides support for aluminum prices. In the short term, aluminum prices are expected to hover at highs, with key resistance at 21,000 yuan/mt. Focus on the evolution of tariff policies, US inflation data, and the pace of end-use consumption recovery.

[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.]