The central bank stated that it would seize the opportunity to implement RRR cuts and interest rate cuts, focusing on the release of end-use demand. [SMM Aluminum Morning Meeting Summary]

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March 14 SMM Aluminum Morning Meeting Summary

Futures Market: Overnight, the most-traded SHFE aluminum 2505 contract opened at 20,945 yuan/mt, hitting a high of 21,035 yuan/mt and a low of 20,875 yuan/mt, before closing at 21,020 yuan/mt, up 35 yuan/mt or 0.17%. On Thursday, LME aluminum opened at $2,701/mt, reached a high of $2,707.5/mt and a low of $2,666.5/mt, and closed at $2,705/mt, up $5/mt or 0.19%.

Macro: (1) The central bank held an expanded meeting, emphasizing the implementation of an appropriately loose monetary policy and the timing of RRR cuts and interest rate cuts based on domestic and overseas economic and financial conditions as well as financial market performance. (Bullish★) (2) The National Financial Regulatory Administration announced the continued expansion and efficiency improvement of the urban real estate financing coordination mechanism, ensuring the delivery of housing projects and accelerating the formulation of financing systems aligned with the new real estate development model. (Bullish★) (3) Regarding the recent implementation of the US policy imposing a 25% tariff on imported steel and aluminum, Ministry of Commerce spokesperson Yongqian He responded on the 13th, stating that China has consistently viewed the US Section 232 measures as unilateralism and protectionism under the guise of "national security." China, along with many other countries, firmly opposes these measures and urges the US to revoke the Section 232 measures on steel and aluminum promptly. (Neutral) (4) The US February PPI MoM recorded 0%, below the expected 0.3%, marking the smallest increase since July 2024. Following the release of US initial jobless claims and PPI data, US short-term interest rate futures still indicate that the US Fed will cut interest rates in June. (Bullish★)

Fundamentals: (1) According to SMM, as of this Thursday (March 6-13), the national operating capacity of aluminum stood at approximately 43.78 million mt/year, with an operating rate of 95.6%. Recently, aluminum production has resumed, leading to higher operating capacity. However, due to the time required to reach full production, there was no significant contribution to this week's aluminum production, which remained around 857,000 mt. (Neutral) (2) Domestic spot alumina prices showed a renewed downward trend. Since last Thursday through Friday, sporadic spot transactions emerged in the north China market, with transaction prices generally ranging from 3,200-3,300 yuan/mt. The decline in spot alumina prices resumed. (Bearish★) (3) According to an SMM survey, the operating rate of leading domestic aluminum downstream processing enterprises rose 0.8 percentage points WoW to 61.6% this week. Aluminum processing enterprises continued their recovery trend, but high aluminum prices suppressed downstream purchase willingness, limiting the operations of some enterprises. SMM predicts that the operating rate will continue to rise next week, potentially exceeding the 62% threshold. (Bullish★)

Primary Aluminum Market: On Thursday morning, SHFE aluminum fluctuated, with the front-month contract consolidating around 20,900-21,000 yuan/mt. Spot market sentiment was bullish, and aluminum ingot destocking supported high prices. Specifically, trading activity among traders in east China was active, but rapid price increases made it difficult to narrow spot discounts. Yesterday, SMM A00 aluminum recorded a discount of 40 yuan/mt against the SHFE aluminum 2503 contract, with SMM A00 aluminum ingot prices at 20,910 yuan/mt, up 10 yuan/mt from the previous trading day. In the central China market, transactions showed no significant improvement yesterday. Downstream safety-related production restrictions ended, and high prices led to prioritizing inventory consumption. Yesterday, transactions in central China were mainly on par with SMM central China prices, with SMM central China A00 aluminum recording 20,790 yuan/mt against the SHFE aluminum 2503 contract, up 10 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -120 yuan/mt. In the short term, destocking in major consumption areas and optimistic downstream demand expectations will support aluminum prices. Combined with downstream purchasing as needed, spot premiums and discounts may fluctuate.

Secondary Aluminum Raw Materials: Yesterday, primary aluminum spot prices rose 10 yuan/mt from the previous trading day, with SMM A00 spot closing at 20,910 yuan/mt. The aluminum scrap market remained stable, with downstream purchasing as needed. Baled UBC aluminum scrap was quoted at 15,250-16,150 yuan/mt (excluding tax), while shredded aluminum tense scrap was quoted at 16,450-17,950 yuan/mt (excluding tax). In the short term, domestic new scrap supply has improved, but downstream demand remains weak. Coupled with high primary and aluminum scrap prices, downstream and end-use demand remains sluggish, and aluminum scrap prices may fluctuate rangebound with primary aluminum.

Secondary Aluminum Alloy: Yesterday, aluminum prices fluctuated slightly, and the secondary aluminum market remained stable. SMM ADC12 prices were unchanged from the previous day, ranging from 21,200-21,400 yuan/mt. Current downstream demand is weak, and low-priced supplies in the market are abundant, limiting the upside room for ADC12 prices. If demand continues to show no significant improvement, ADC12 prices may face downward pressure due to cost easing and the impact of low-priced supplies in the market.

Summary: Macro side, the central bank emphasized implementing an appropriately loose monetary policy and timing RRR cuts and interest rate cuts. Fundamentals side, domestic aluminum production resumption continues; with weak spot prices for alumina and petroleum coke, cost side support for aluminum weakens further. Aluminum ingot social inventory continued destocking during the week, coupled with a sustained recovery in aluminum processing enterprise operations, providing support on the consumption side. However, high aluminum prices suppressed downstream purchase willingness, limiting the momentum for operating rate growth in some enterprises, while spot premiums in various regions faced constraints. Aluminum prices are expected to hover at highs in the near term, with close attention to changes in US tariff policies and the actual release of downstream demand.

【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.】