Behind the Change in Aluminum Prices: Limited Supply, Divergent Demand, and Tariff Uncertainty [SMM Aluminum Price Weekly Review]

Macro front, the US tariff policy remains uncertain. Since Trump announced the tariff hike, the US Midwest aluminum spot premiums have surged past $900/mt. Although there are exemptions for auto tariffs, they do not cover steel and aluminum. Intensified overseas trade frictions pushed aluminum prices higher during the week, but it is also necessary to note that global market volatility and concerns over economic growth may trigger risk-averse sentiment, exerting some resistance on aluminum prices.

Supply growth is limited: SMM's weekly domestic aluminum existing capacity is approximately 45.81 million mt, with operating capacity around 43.78 million mt and a comprehensive operating rate of 95.57%. As enterprises in the southwest and northern regions resume production, the annualized operating capacity of aluminum is expected to reach 43.84 million mt by the end of March. However, the domestic capacity ceiling limits significant supply growth, continuously providing support for aluminum prices.

Cost side support weakens: Observing the cost side of the aluminum industry, the immediate full average cost of aluminum is approximately 17,335 yuan/mt, down 111 yuan/mt WoW. Spot prices of alumina, petroleum coke, and other raw and auxiliary materials fluctuate downward, further weakening cost-side support.

Demand performance diverges: With the arrival of the traditional peak season of "Golden March and Silver April," the operating rates of downstream aluminum processing industries generally rebounded. Aluminum plate/sheet and strip benefited from the rebound in NEV and battery demand, leading to an increase in operating rates. Aluminum foil saw steady growth in operating rates driven by increased orders for air-conditioner foil and battery foil. However, sectors such as construction profiles, aluminum wire and cable, and aluminum alloy remained constrained by inventory pressure and insufficient demand. Additionally, after aluminum prices rose to high levels during the week, aluminum plate/sheet and strip enterprises experienced a decline in end-user shipments, resulting in an inventory buildup of finished products. Raw material inventory restocking remained cautious, and spot premiums in various regions were restricted.

Inventory shows destocking: SMM's weekly social inventory recorded 862,000 mt, down 6,000 mt from Monday, also providing support for aluminum prices. Attention should be paid to the potential damage of high aluminum prices to downstream consumption. However, the market generally expects the turning point for aluminum ingot destocking to be clear.

Technical analysis: The model predicts that the closing price of the aluminum most-traded contract will fluctuate between [20,475, 21,360] yuan/mt from this Thursday to next Wednesday (2025-03-19), with a price center of 20,920 yuan/mt. The extreme price range is [19,820, 22,010] yuan/mt, the normal price range is [20,260, 21,580] yuan/mt, and the conservative price range is [20,690, 21,140] yuan/mt. Next week's price trend is expected to fluctuate upward. The support range is [20,260, 20,690] yuan/mt, and the resistance range is [21,140, 21,580] yuan/mt.

In summary, close attention should be paid to changes in US tariff policies and the actual release of downstream demand. If overseas trade frictions escalate further and downstream demand under high aluminum prices falls short of expectations, the upward momentum of aluminum prices may weaken. Next week, the most-traded SHFE aluminum contract is expected to fluctuate between 20,700-21,000 yuan/mt, while LME aluminum is expected to fluctuate between $2,620-2,720/mt.

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