Overseas Market Sentiment Under Pressure on Monday, SHFE Aluminum Night Session Continues to Retreat [SMM Aluminum Morning Meeting Summary]

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March 25 SMM Aluminum Morning Meeting Summary

Futures: The most-traded SHFE aluminum 2505 contract opened at 20,750 yuan/mt, reached a high of 20,750 yuan/mt, a low of 20,625 yuan/mt, and closed at 20,640 yuan/mt, down 60 yuan/mt, or 0.29%. LME aluminum opened at $2,622.5/mt, hit a high of $2,645/mt, a low of $2,605/mt, and closed at $2,614.5/mt, down $10/mt, or 0.38%.

Macro: (1) The US March S&P Global Manufacturing PMI preliminary reading was 49.8, the lowest in three months. The US March S&P Global Services PMI preliminary reading was 54.3, the highest in three months. (Bearish ★) (2) US Fed Bostic believes there will only be one interest rate cut this year as inflation progress slows. (Bearish ★) (3) Finance Minister Lan Fuan stated that fiscal policy in 2025 will be more proactive, with continuous and stronger efforts. (Bullish ★★) (4) Premier Li Qiang signed a State Council decree, announcing the revised "Regulations on Ensuring Payment to Small and Medium-Sized Enterprises" and "Provisions for Implementing the Anti-Foreign Sanctions Law of the People's Republic of China." (Neutral)

Fundamentals: (1) According to SMM, on March 24, the inventory of electrolytic aluminum ingots in major domestic consumption areas was 827,000 mt, down 7,000 mt from last Thursday and 35,000 mt from last Monday. (Bullish ★★) (2) According to SMM, on March 24, the inventory of aluminum billets in major domestic consumption areas was 284,500 mt, down 3,500 mt from last Thursday. (Bullish ★) (3) According to SMM, during 3.17-3.23, outflows from warehouses of aluminum ingots totaled 128,400 mt, up 1,300 mt WoW. (Bullish ★) (4) According to SMM, during 3.17-3.23, outflows from warehouses of aluminum billets totaled 62,200 mt, up 10,800 mt WoW. (Bullish ★★)

Primary Aluminum Market: On Monday, SHFE aluminum fluctuated. The slight destocking of social inventory provided limited support for price increases. In the morning session, SHFE aluminum mainly fluctuated. Suppliers stood firm on quotes, and the market traded at a small premium. Due to the absolute price pullback, market trading was moderate. Specifically, in east China, traders stood firm on quotes, and the market traded at SMM A00 average or +10. SMM A00 was at a discount of 30 yuan/mt against the SHFE aluminum 2504 contract, with SMM A00 aluminum ingot recorded at 20,660 yuan/mt, down 130 yuan/mt from the previous trading day. In central China, Monday's trading was moderate. The futures market declined, and suppliers stood firm on quotes, with transactions around parity to +10. However, downstream purchase willingness remained weak, and the market mainly purchased as needed during the long-term contract delivery period. SMM central China A00 was recorded at 20,560 yuan/mt, down 110 yuan/mt from the previous trading day, with the price spread between central China and Shanghai at -100 yuan/mt. In the short term, the peak season background of "Golden March, Silver April" and the PV rush for installations are expected to continue the destocking trend. Aluminum prices are more likely to rise than fall, but due to the high aluminum prices, the spot market premiums face resistance.

Secondary Aluminum Raw Material: On Monday, the aluminum scrap market adjusted downward. Downstream maintained purchasing as needed. The baled UBC scrap aluminum price decreased by 0-100 yuan/mt to 15,250-16,050 yuan/mt (excluding tax), and shredded aluminum tense scrap prices were concentrated at 16,450-17,450 yuan/mt (excluding tax). Currently, scrap aluminum traders are relatively active in selling, but downstream orders remain insufficient. With aluminum prices fluctuating at high levels, downstream mainly purchases as needed, and stockpiling sentiment is low. In the short term, scrap aluminum prices may follow primary aluminum and fluctuate rangebound.

Secondary Aluminum Alloy: Domestic SMM ADC12 prices fell 100 yuan/mt from Friday to 21,000-21,200 yuan/mt; in the import market, overseas ADC12 prices remained above $2,500/mt. With recent domestic price pressure and RMB depreciation, the immediate loss for importing ADC12 expanded to over 500 yuan/mt. On Monday, aluminum prices continued to decline, and secondary aluminum plants mostly lowered their quotes by 100 yuan/mt, with some holding steady. Insufficient demand and weakening costs mean that secondary aluminum alloy prices are more likely to fall than rise in the short term.

Summary: From a macro perspective, on Monday, the US dollar index returned to the 104 level, closing up 0.16% at 104.31, as data showed a rebound in US business activity in March. SHFE aluminum night session continued to adjust. US Fed Bostic's hawkish comments and overall bearish PMI data somewhat dampened external market sentiment. Domestically, the positive macro front remains unchanged. Finance Minister Lan Fuan stated that fiscal policy in 2025 will be more proactive, with continuous and stronger efforts. The first-quarter PBOC meeting suggested increasing the intensity of monetary policy regulation, with potential RRR cuts and interest rate cuts. The finance minister's positive signals, along with substantial fiscal support for consumption, such as raising pensions and providing child-rearing subsidies, aim to boost consumption. Fundamentally, the aluminum industry chain is still bullish. The seasonal destocking trend of "Golden March, Silver April" is further confirmed, and end-use consumption, such as NEVs, is steadily growing. The import window remains closed, and net imports of primary aluminum in January-February 2025 YoY significantly decreased. Currently, aluminum prices maintain an LME outperforms SHFE pattern. The domestic import window is closed, and import losses hover around 2,600 yuan/mt, reducing overseas suppliers' willingness to clear customs and ship to China. SMM expects that in March, domestic primary aluminum imports will mainly be based on long-term contracts, with no significant increase in net imports. SMM believes that continued destocking over the weekend and domestic policy support will underpin short-term prices. If expectations for US Fed interest rate cuts rise or if trade relations between the US and Europe improve, aluminum prices may continue to fluctuate upward. However, whether SHFE aluminum can return to the 21,000 yuan/mt level still requires further upward momentum. Close attention should be paid to changes in macro sentiment 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.]