Sentiment Boost from Easing Overseas Trade Frictions Coupled with Significant Destocking Trend Makes Aluminum Price Uptrend More Clear [SMM Aluminum Morning Meeting Summary]

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3.21 SMM Aluminum Morning Meeting Summary

Futures Market: Overnight, the most-traded SHFE aluminum 2505 contract opened at 20,875 yuan/mt, reached a high of 20,895 yuan/mt, and a low of 20,780 yuan/mt, closing at 20,840 yuan/mt, down 55 yuan/mt, or 0.26%. LME aluminum opened at $2,674/mt, reached a high of $2,691/mt, and a low of $2,653/mt, closing at $2,657/mt, down $16/mt, or 0.60%.

Macro: Overseas, global trade dynamics - ① Trump urged the US Fed to cut interest rates, stating that US tariffs are starting to impact the economy; (Bullish ★) ② Mexico's Minister of Economy: Heading to Washington for trade talks on Thursday; ③ EU Trade Commissioner: Considering postponing the implementation of the first round of retaliatory tariffs against the US until mid-April; (Bullish ★) ④ Trump: India will be subject to reciprocal tariffs from April 2 (Neutral). (3) The March LPR was announced: 1-year at 3.1%, and over 5 years at 3.6%, unchanged for five consecutive months, in line with market expectations. (Neutral) (4) As existing and incremental policy measures take effect, the development space for private investment continues to expand, and the innovation capabilities of the private economy continue to strengthen, with related indicators showing positive improvement. For example, the SME Development Index hit its highest value in nearly four years, and YoY private investment growth in January-February ended five consecutive months of negative growth, with manufacturing private investment growing by 10.2% and infrastructure private investment growing by 8.0%. (Bullish ★)

Fundamentals: (1) According to SMM, on March 20, domestic mainstream consumption area electrolytic aluminum ingot inventory was 839,000 mt, down 28,000 mt WoW. (Bullish ★) (2) On March 20, LME aluminum inventory was 487,525 mt, down 1,525 mt, a decrease of 0.33%. (Bullish ★)

Primary Aluminum Market: In the early session yesterday, the center of the front-month SHFE aluminum contract almost continuously moved upward, rebounding above 20,800 yuan/mt. In the spot market, the absolute price center in east China shifted downward, with improved downstream trading and increased outflows from warehouses. Although the aluminum price rebounded to a high level, destocking still boosted market confidence, and spot premiums remained firm. The market traded SMMA00 at parity to 10 yuan/mt. SMMA00 was at a discount of 40 yuan/mt against the SHFE aluminum 2504 contract, up 10 yuan/mt from the previous trading day, with SMM A00 aluminum ingot recorded at 20,810 yuan/mt, up 220 yuan/mt from the previous trading day. In the central China market, due to the previous decline in aluminum prices, downstream restocking increased, and destocking in the central China market grew, boosting supplier confidence. Most suppliers were holding back, expecting higher prices, and premiums remained firm during the day. However, as prices rebounded to a high level, downstream willingness to trade decreased, and trading activity significantly declined. SMM central China A00 was recorded at 20,700 yuan/mt against the SHFE aluminum 2504 contract, up 220 yuan/mt from the previous trading day, with the price spread between central China and Shanghai at -110 yuan/mt. Actual market transactions were at parity to a premium of 10 yuan/mt against the SMM central China price. Under the peak season expectation of "Golden March, Silver April," high aluminum prices will gradually be absorbed by the downstream, but in the short term, as aluminum prices rebound to a high level, the spot market premiums face some resistance.

Secondary Aluminum Raw Materials: Yesterday, the primary aluminum spot price rose 220 yuan/mt, with SMM A00 spot closing at 20,810 yuan/mt. The scrap aluminum market followed the rise, but due to lackluster terminal orders, downstream buyers maintained purchasing as needed. Yesterday, baled UBC scrap aluminum was concentrated at 15,250-16,100 yuan/mt (excluding tax), and shredded aluminum tense scrap was concentrated at 16,450-17,950 yuan/mt (excluding tax). In the short term, the weak supply and demand situation in the domestic scrap aluminum market is unlikely to improve significantly, and with both primary and scrap aluminum prices fluctuating at highs, the downstream will only maintain purchasing as needed, and scrap aluminum prices may follow primary aluminum and fluctuate rangebound.

Secondary Aluminum Alloy: Yesterday, the aluminum price quickly rebounded, with SMM A00 aluminum rising 220 yuan/mt to 20,810 yuan/mt. Secondary aluminum prices mainly held steady or slightly increased. Domestic SMM ADC12 prices remained in the 21,100-21,300 yuan/mt range; in the import market, overseas ADC12 prices remained firm above $2,500/mt, with immediate import losses expanding to 300-500 yuan/mt. Yesterday, the aluminum price recovered the previous day's losses, but the secondary aluminum market lacked momentum to follow. Currently, downstream demand is relatively weak, and orders remain sluggish, maintaining a more likely to fall than rise pattern in the short term.

Summary: From a macro perspective, in the short term, aluminum prices benefit from the sentiment boost of monetary policy easing expectations and trade friction easing, providing a clearer upward drive; however, one must be cautious of the regional supply surplus risk brought by Indian export shifts and the potential pressure of trade negotiation outcomes falling short of expectations. Domestically, the pressure to stabilize the exchange rate has eased, and the market interest rate center has clearly risen, with phased monetary policy goals gradually being achieved. However, there is still significant uncertainty in overseas policies, and constraints remain. At the same time, the short-term stabilization of the domestic economy and the long-term improvement in macro demand, along with double-digit growth in private manufacturing investment and continuous enhancement of the innovation capabilities of the private economy, mean that although the expectation of monetary easing still exists, it is not urgent. Fundamentally, the aluminum industry chain shows significant bullish signals: according to SMM, on March 20, domestic mainstream consumption area electrolytic aluminum ingot inventory was 839,000 mt, down 28,000 mt WoW; LME aluminum inventory also decreased by 1,525 mt, a 0.33% drop, indicating a clear destocking trend and the ongoing effect of the peak consumption season. If expectations for US Fed interest rate cuts increase or if trade relations between the US and Europe further ease, aluminum prices may continue to fluctuate upward in the short term. It is necessary to closely monitor 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 advice for investment research decisions. Clients should make prudent decisions and not rely solely on this information. Any decision made by clients is unrelated to SMM.]