Mid-week aluminum ingot inventory plummeted, expected to drive SHFE aluminum upward [SMM Aluminum Morning Meeting Summary]

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3.27 SMM Aluminum Morning Meeting Summary

Futures: Last night, the most-traded SHFE aluminum 2505 contract opened at 20,710 yuan/mt, with a high of 20,720 yuan/mt, a low of 20,665 yuan/mt, and closed at 20,675 yuan/mt, down 25 yuan/mt, or 0.12%. Yesterday, LME aluminum opened at $2,612/mt, with a high of $2,628/mt, a low of $2,600.5/mt, and closed at $2,605/mt, down $3/mt, or 0.12%.

Macro: (1) Trump announced a 25% tariff on all imported cars, stating that the reciprocal tariff plan would be "loose"; insiders: Trump will accelerate copper tariffs, which could be implemented within weeks. US President Trump: There are not many exceptions to the April 2 tariffs. (Bearish★★) (2) US Fed's Moussaalem: Given the ongoing economic growth, there is no need to rush to cut interest rates, tariffs may lead to sustained inflation; Goolsbee: The US bond market is starting to expect higher inflation levels, which would be a "major red flag"; Kashkari: The US Fed should remain on hold for a long time amid policy uncertainty, we have made significant progress in reducing inflation, but there is still more work to do. The job market remains strong, the biggest challenge is to finish the job. (Bearish★) (3) US Congressional Budget Office: If the debt ceiling is not raised, the government could face default risks as early as August. (Bearish★) (4) Ministry of Commerce: Launch pilot reforms for automobile circulation and consumption, develop new consumption scenarios such as automobile events and RV camping according to local conditions, and expand the aftermarket for automobiles. (Bullish★★)

Fundamentals: (1) According to SMM statistics, on March 27, domestic mainstream consumption areas' aluminum ingot inventory was 802,000 mt, down 25,000 mt from Monday, and down 32,000 mt WoW. (Bullish★★) (2) According to SMM statistics, on March 26, domestic aluminum billet inventory in two regions: Guangdong aluminum billet inventory was 164,700 mt, Wuxi aluminum billet inventory was 48,500 mt, totaling 213,200 mt, down 3,700 mt. (Bullish★) (3) LME inventory data released on March 26 showed aluminum inventory decreased by 3,525 mt, or 0.74%, to 473,100 mt. Port Klang warehouse saw the largest change, down 2,000 mt, accounting for more than half of the total decline. In addition, Gwangyang warehouse fell by 1,525 mt. (Bullish★)

Primary aluminum market: Yesterday, SHFE aluminum opened higher but then fluctuated and pulled back slightly. The spot market was stimulated by continued destocking, coupled with insufficient subsequent arrivals, suppliers stood firm on quotes, spot discounts narrowed, downstream overall purchased as needed, with some manufacturers in east China stockpiling more. Specifically, traders in east China stood firm on quotes, the market quoted SMM A00 at +10 yuan/mt, with some at +20 yuan/mt. Yesterday, SMM A00 was at a discount of 10 yuan/mt against the SHFE aluminum 2504 contract, SMM A00 aluminum ingot recorded 20,670 yuan/mt, up 10 yuan/mt from the previous trading day. The central China market saw lighter trading due to the rebound in futures, trading was near parity. SMM central China A00 recorded 20,570 yuan/mt against the SHFE aluminum 2504 contract, flat from the previous trading day, the Henan-Shanghai price spread was -100 yuan/mt. In the short term, the peak season background coupled with the growing trend of aluminum use in new energy, social inventory is expected to continue the destocking trend, and subsequent arrivals in mainstream consumption areas such as Wuxi are expected to be low, spot market premiums and discounts may narrow.

Secondary aluminum raw materials: Yesterday, aluminum scrap prices were basically stable, downstream maintained purchasing as needed. Yesterday, baled UBC scrap aluminum quotes were flat at 15,250-16,050 yuan/mt (excluding tax), shredded aluminum tense scrap quotes were concentrated at 16,450-17,450 yuan/mt (excluding tax). Currently, aluminum scrap traders are relatively active in selling, but downstream orders remain insufficient, and aluminum prices are fluctuating at high levels, downstream mainly purchases as needed, with low stockpiling sentiment. In the short term, aluminum scrap prices may follow primary aluminum in fluctuating rangebound.

Secondary aluminum alloy: Yesterday, secondary aluminum prices continued to stabilize. Domestic SMM ADC12 prices were flat in the range of 21,000-21,200 yuan/mt; in the import market, overseas ADC12 quotes remained above $2,500/mt, while domestic prices are under pressure recently, coupled with the continued depreciation of the RMB, the immediate loss of imported ADC12 expanded to more than 500 yuan/mt. Yesterday, aluminum prices overall fluctuated little, the secondary aluminum market had low sentiment for price adjustments. Insufficient demand coupled with weakening costs, in the short term, secondary aluminum alloy prices are more likely to fall than rise.

Summary: On the macro front, after insiders said Trump was ready to announce auto tariffs as early as this Wednesday local time (now announced a 25% tariff on all imported cars), the US dollar index continued to rise, finally up 0.43%, closing at 104.67, SHFE aluminum night session was weak and fluctuated rangebound. Domestic macro favorable tone remains unchanged, Minister of Finance Lan Fo'an stated that fiscal policy in 2025 should be more proactive, continue to exert force, and be more forceful; the central bank's Q1 meeting suggested increasing the intensity of monetary policy regulation, and cutting RRR and interest rates at an opportune time. The central government is putting up "real money" to vigorously promote consumption, increasing pensions, and issuing childcare subsidies to enhance consumption capacity. Automobile circulation reform and new consumption scenarios (such as NEVs and lightweight trends) directly stimulate aluminum demand growth, especially in automobile manufacturing and aftermarket, significantly bullish for aluminum prices. On the fundamentals side, the aluminum industry chain remains mainly bullish, the "Golden March and Silver April" seasonal destocking trend is further clarified, aluminum ingot inventory has approached the 800,000 mt mark after a sharp drop mid-week; end-use consumption such as NEVs is steadily growing, downstream restocking demand has also warmed up. SMM believes that this week's continued good destocking state and domestic policy support will support short-term prices, if expectations for US Fed interest rate cuts heat up or EU-US trade relations further ease, aluminum prices may continue to fluctuate upward in the short term, but the short-term market is still somewhat suppressed by external bearish factors, whether SHFE aluminum can return to the 21,000 yuan/mt mark still needs to find further upward momentum. Continue to closely monitor 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 decisions cautiously, and not use this to replace independent judgment, any decisions made by clients are not related to SMM】