US February CPI Data Below Expectations, Overnight Aluminum Prices Rise [SMM Aluminum Morning Meeting Summary]

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3.13 SMM Aluminum Morning Meeting Notes

Futures Market: Overnight, the most-traded SHFE aluminum 2505 contract opened at 21,060 yuan/mt, hitting a high of 21,100 yuan/mt and a low of 20,945 yuan/mt, and closed at 20,970 yuan/mt, up 5 yuan/mt or 0.02%. On Wednesday, LME aluminum opened at $2,704/mt, reached a high of $2,726/mt and a low of $2,692.5/mt, and closed at $2,700/mt, down $4/mt or 0.15%.

Macro: (1) The US February CPI rose 2.8% YoY (forecast: 2.9%, previous: 3%) and increased 0.2% MoM (forecast: 0.3%, previous: 0.5%). February CPI data fell short of expectations across the board, prompting traders to raise bets on US Fed interest rate cuts, with at least two cuts expected this year. (Bullish ★) (2) On March 12 local time, Canada's Finance Minister announced that starting March 13, Canada will impose a 25% retaliatory tariff on $29.8 billion worth of US goods. This tariff policy covers $12.6 billion in steel products, $3 billion in aluminum products, and $14.2 billion in other US goods. (Bullish ★)

Fundamentals: (1) According to SMM statistics, as of March 13, domestic aluminum ingot inventory in major consumption areas stood at 862,000 mt, down 6,000 mt from Monday. (Bullish ★) (2) On March 12 (Wednesday), data released by Marubeni Corp showed that aluminum inventory at Japan's three major ports fell to 313,400 mt by the end of February 2025, down approximately 3.5% from the previous month. (Bullish ★)

Primary Aluminum Market: On Wednesday morning, SHFE aluminum showed a clear upward trend, with the center of the front-month contract shifting higher. Spot market sentiment was bullish, and suppliers stood firm on quotes. Specifically, trading activity was active among traders in east China, but the rapid rise in aluminum prices made it difficult to narrow spot discounts. Yesterday, SMM A00 aluminum was at a discount of 40 yuan/mt against the SHFE 2503 contract, with SMM A00 aluminum ingot recorded at 20,900 yuan/mt, up 190 yuan/mt from the previous trading day. In central China, transactions were moderate yesterday. Although downstream safety-related production restrictions ended, enterprises still held inventory. Considering high aluminum prices, enterprises mainly focused on digesting inventory. Yesterday, transactions in central China were mostly on par with SMM central China prices, with SMM central China A00 aluminum at 20,780 yuan/mt against the SHFE 2503 contract, up 180 yuan/mt from the previous trading day, and the Henan-east China price spread was -120 yuan/mt. In the short term, inventory destocking in major consumption areas and improved downstream demand expectations will support aluminum prices. Coupled with downstream purchasing as needed, spot premiums and discounts may fluctuate rangebound.

Secondary Aluminum Raw Materials: Yesterday, primary aluminum spot prices rose by 190 yuan/mt from the previous trading day, with SMM A00 spot aluminum closing at 20,900 yuan/mt. Aluminum scrap market quotes generally followed the rise in aluminum prices, but downstream alloy plants showed limited demand improvement and maintained purchasing as needed, leading to limited follow-up increases in aluminum scrap prices. Yesterday, baled UBC aluminum scrap was quoted at 15,300-16,100 yuan/mt (tax excluded), and shredded aluminum tense scrap was quoted at 16,450-17,950 yuan/mt (tax excluded). In the short term, domestic new scrap supply has improved, but due to generally weak downstream demand and high prices of primary and aluminum scrap, downstream and end-use demand remain sluggish, and aluminum scrap prices may fluctuate rangebound along with primary aluminum.

Secondary Aluminum Alloy: Yesterday, aluminum prices rebounded significantly, but the secondary aluminum market lacked momentum to follow. Domestic SMM ADC12 prices remained unchanged from the previous day at 21,200-21,400 yuan/mt. Current market demand is weaker than expected, with slow order recovery suppressing 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, combined with further easing of cost support, ADC12 prices may face continued pressure for upward adjustments or even downward pressure.

Summary: On the macro side, US February inflation data fell short of expectations, alleviating some market concerns and raising expectations for a US Fed interest rate cut in June. Fundamentals side, domestic aluminum production resumption continues; aluminum ingot social inventory remains in destocking mode during the week, coupled with sustained recovery in aluminum processing enterprise operations, strengthening support from the consumption side. Overall, recent macro sentiment is bullish, and fundamentals show a supply-demand increase trend. Order recovery across multiple sectors is driving downstream operations higher, with social inventory destocking providing support for aluminum prices. In the short term, aluminum prices are expected to hover at highs.

【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.】