Macro Front Stabilizes and SHFE Aluminum Inventory Plunges, SHFE Aluminum Fluctuates Upward [SMM Aluminum Price Weekly Review]

Macro front, the US Fed kept interest rates unchanged at 4.25%-4.5%, significantly lowering this year's economic growth forecast by 0.4 percentage points and raising inflation expectations; Powell repeatedly emphasized uncertainties, reiterating no rush to adjust stance, stating that it is currently in a state where rate cuts and maintaining restrictive policies are both possible, with short-term inflation expectations rising and long-term ones stabilizing. Domestically, the favourable macro melody remains, Premier Li Qiang of the State Council presided over the eighth plenary session of the State Council, and the General Office of the CPC Central Committee and the General Office of the State Council issued the Special Action Plan for Boosting Consumption, which mentioned promoting reasonable growth in wage income, strictly implementing the paid annual leave system, taking multiple measures to stabilize the stock market, studying the establishment of a child-rearing subsidy system, and continuously pushing for the stabilization and recovery of the real estate market. The General Office of the Ministry of Transport and two other departments issued the Implementation Rules for New Energy Urban Bus and Power Battery Renewal Subsidies in 2025, stimulating the renewal of new energy buses through ultra-long-term special treasury funds.

Fundamentals side, observing the cost side of the aluminum industry, the immediate full average cost of aluminum was about 17,061 yuan/mt, down 274 yuan/mt from last Thursday, showing continued easing on the cost side. On the demand side, after aluminum prices adjusted from highs this week, it stimulated restocking demand from end-users to some extent, with downstream operations continuing to expand. This week, the operating rate of the domestic aluminum extrusion industry increased 3 percentage points WoW to 60%, with structural differentiation across application areas. By sector, the industrial extrusion field continues to be driven by new energy, with the NEV industry chain maintaining high prosperity, top-tier enterprises keeping high capacity utilisation rates, and PV extrusion becoming the biggest highlight, with mainstream producers basically operating at full capacity. The building extrusion sector showed a polarized trend, with leading enterprises maintaining normal production schedules due to channel advantages, but order structures have not seen significant improvement; small and medium-sized producers, constrained by financial pressures, still have low operating rates, only maintaining cash-on-delivery window and door orders. In terms of inventory, according to SMM, on March 20, the inventory of aluminum ingot in major domestic consumption areas was 839,000 mt, down 28,000 mt WoW, and aluminum billet inventory also decreased by nearly 10,000 mt WoW, with LME aluminum inventory also falling 0.82%. After aluminum prices pulled back from highs in the first half of the week, outflows from warehouses of spot aluminum improved significantly, coupled with a slight decrease in transit volumes, leading to a sharp reduction in domestic inventory mid-week, effectively boosting market sentiment.

Overall, despite the negative macro resonance caused by overseas trade protectionism and slowing growth in the first half of the week, last night's March Fed meeting announced an unchanged benchmark interest rate, in line with market expectations, and signaled a dovish stance for rate cuts within the year, boosting market risk appetite and driving a rebound in aluminum prices. The domestic favourable macro melody remains, with the country focusing on increasing policy efforts and stimulating positive interactions and synergies between market forces to maximize policy effects; three departments are using ultra-long-term special treasury funds to stimulate the renewal of new energy urban buses. Fundamentally, the aluminum industry chain shows multiple supportive factors, with SMM data showing that on March 20, the inventory of aluminum ingot in major domestic consumption areas was 839,000 mt, down 28,000 mt WoW, and LME aluminum inventory also fell 0.82%, with a clear seasonal destocking trend in the "Golden March, Silver April" period and steady growth in end-use consumption such as NEVs. SMM believes that accelerated destocking mid-week and policy support will maintain a fluctuate upward trend in short-term prices, with close attention to changes in US tariff policies and the actual release of downstream demand. Whether SHFE aluminum can stabilize above 21,000 yuan/mt next week still requires further upward momentum. It is expected that the most-traded SHFE aluminum 2505 contract will trade between 20,600-21,400 yuan/mt, and LME aluminum is expected to trade between $2,640-2,760/mt.