Macro risk aversion sentiment was strong, SHFE aluminum rebounded from lows in the night session [SMM Aluminum Morning Meeting Summary]

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3.28 SMM Aluminum Morning Meeting Summary

Futures: The most-traded SHFE aluminum 2505 contract opened at 20,710 yuan/mt overnight, hitting a high of 20,720 yuan/mt and a low of 20,570 yuan/mt, and closed at 20,610 yuan/mt, down 170 yuan/mt or 0.82%. LME aluminum opened at $2,605/mt yesterday, reaching a high of $2,620/mt and a low of $2,555/mt, and closed at $2,559/mt, down $46/mt or 1.77%.

Macro: (1) US initial jobless claims were lower than expected: US initial jobless claims for the week ending January 11 recorded 224,000, below the expected 225,000; US Q4 real GDP annualized QoQ was revised up to 2.4%, while the Q4 core PCE price index annualized QoQ was revised down to 2.6%. (Bearish★) (2) EU Commission spokesperson: The EU is preparing a response to the new US import tariffs but has not yet determined the timing. The EU's response will be timely, strong, and precise; the EU plans to target US service exports, including large tech companies. Canadian Prime Minister: Canada will respond to US tariffs next week; Ontario Premier: The US will grant full or partial exemptions to Canadian auto tariffs. Brazilian President Lula: Will impose retaliatory tariffs on US products. (Bearish★) (3) Two departments: Continue to implement offshore trade stamp duty preferential policies. (Bullish★) (4) PBOC Deputy Governor Xuan Changneng: Will implement RRR cuts and interest rate cuts based on domestic and overseas economic and financial conditions. (Bullish★★)

Fundamentals: (1) According to SMM statistics, domestic mainstream consumption area aluminum ingot inventory stood at 802,000 mt on March 27, down 25,000 mt from Monday and 32,000 mt WoW. (Bullish★★) (2) According to the latest SMM data, domestic aluminum billet social inventory stood at 272,000 mt as of March 27, 2025, down 16,000 mt WoW and 12,500 mt from Monday. (Bullish★) (3) According to SMM, aluminum billet producers in Guangxi recently adjusted production pace due to persistently low processing fees. Incomplete statistics show that the current month's (March) production cuts affected about 14,000 mt, accounting for about 8% of Guangxi's monthly aluminum billet production. (Bearish★) (4) LME inventory data released on March 27 showed aluminum inventory decreased by 3,525 mt or 0.75% to 469,575 mt. (Bullish★)

Primary aluminum market: Yesterday morning, the futures market surged and maintained high-level fluctuations due to significant destocking of domestic aluminum ingot inventory. The spot market saw cautious sentiment amid high prices, with transactions mainly at the average price. Specifically, east China traders stood firm on quotes, with SMM A00 reported at parity to +10 yuan/mt, and most transactions at parity. SMM A00 was at a discount of 10 yuan/mt against the SHFE aluminum 2504 contract, and SMM A00 aluminum ingot closed at 20,810 yuan/mt, up 140 yuan/mt from the previous day. In central China, the market was sluggish due to the futures surge, with transactions at -20 to parity. SMM central China A00 closed at 20,710 yuan/mt against the SHFE aluminum 2504 contract, up 140 yuan/mt from the previous day, with the Henan-Shanghai price spread at -100 yuan/mt. In the short term, the peak season and growing NEV aluminum demand support continued destocking, with fewer arrivals in mainstream consumption areas like Wuxi. However, downstream caution has slowed the narrowing of premiums and discounts.

Secondary aluminum raw materials: Aluminum scrap prices generally rose yesterday, with downstream purchasing as needed. Today, baled UBC scrap aluminum prices rose 100 yuan/mt to 15,350-16,050 yuan/mt (excluding tax), while shredded aluminum tense scrap was quoted at 16,450-17,450 yuan/mt (excluding tax). High aluminum prices and insufficient downstream orders limited overall market transactions. In the short term, aluminum scrap prices may fluctuate rangebound with primary aluminum.

Secondary aluminum alloy: Secondary aluminum prices remained stable yesterday. Domestic SMM ADC12 prices were flat at 21,000-21,200 yuan/mt; in the import market, overseas ADC12 quotes remained above $2,500/mt, with immediate losses for imported ADC12 still above 500 yuan/mt. Today, as aluminum prices rose, the secondary aluminum market struggled to catch up, with weak demand and cost pressures keeping secondary aluminum alloy prices more likely to fall than rise in the short term.

Summary: Macro-wise, the US dollar index fell 0.37% as Trump's tariff policies brought uncertainty to the US economy. Despite faster-than-expected US Q4 growth, investors were more concerned about Trump's new auto tariffs, with risk-off sentiment dominating. SHFE aluminum pulled back under pressure in the night session. Domestic macro positives remained, with Finance Minister Lan Fo'an stating that 2025 fiscal policy will be more proactive and forceful; PBOC Deputy Governor Xuan Changneng reiterated the possibility of RRR and interest rate cuts based on conditions. Central fiscal measures to boost consumption, such as raising pensions and providing childcare subsidies, directly stimulated aluminum demand, especially in auto manufacturing and aftermarket sectors, significantly bullish for aluminum prices. Fundamentals-wise, the aluminum industry chain remained bullish, with the "golden March, silver April" seasonal destocking trend further confirmed, as aluminum ingot inventory approached the 800,000 mt mark after a mid-week sharp drop; NEV and other end-use consumption grew steadily, with downstream restocking demand also recovering. SMM believes that continued good destocking and domestic policy support will underpin short-term prices. If expectations for US Fed interest rate cuts rise or US-EU trade relations ease further, aluminum prices may continue to fluctuate upward in the short term, but the market remains somewhat suppressed by external bearish factors. Whether SHFE aluminum can return to the 21,000 yuan/mt level still requires further upward momentum. Continued close attention to macro sentiment changes and actual downstream demand release is needed.

[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make decisions cautiously and not use this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]