External bearish pressures intertwined with fundamental bullish factors, focus on the support level of the most-traded SHFE aluminum contract [SMM Aluminum Morning Meeting Summary]

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3.31 SMM Aluminum Morning Meeting Summary

Futures: The most-traded SHFE aluminum 2505 contract opened at 20,590 yuan/mt overnight, with a high of 20,640 yuan/mt and a low of 20,555 yuan/mt, closing at 20,575 yuan/mt, down 35 yuan/mt, or 0.17%. Yesterday, LME aluminum opened at $2,563.5/mt, with a high of $2,570.5/mt and a low of $2,545/mt, closing at $2,550/mt, down $9/mt, or 0.35%.

Macro: (1) On March 31, the National Bureau of Statistics (NBS) released the official manufacturing PMI and non-manufacturing PMI for March. In February, the manufacturing PMI was 50.2%, up 1.1 percentage points MoM, indicating a significant rebound in manufacturing activity. (Neutral) (2) US President Trump plans to announce "reciprocal tariffs" on April 2 local time. If Trump introduces a broad tariff policy next week, he will face collective countermeasures from global trading partners. (Bearish★) (3) The US personal consumption expenditure (PCE) price index rose 0.3% MoM and 2.5% YoY in February 2025, while the core PCE price index increased 0.4% MoM, with the YoY growth rate accelerating from 2.7% to 2.8%. (Bearish★)

Fundamentals: (1) According to SMM data, the composite PMI index of China's aluminum processing industry recorded 61.6% in March 2025, above the 50 mark. (Bullish★); (2) The operating rate of leading enterprises in China's aluminum wire and cable industry was 60%, up 2% WoW, maintaining an upward trend. Recent operating data shows that the industry's operating rate is steadily increasing, mainly due to the approaching delivery phase of power grid project-related orders in April, coupled with the landing of new orders. Enterprises are rushing to deliver orders in advance to increase finished product inventories. As the construction progress of UHV and power transmission projects accelerates, the pressure for cargo pick-up is expected to increase, forcing enterprises to improve capacity utilization and further increase operating rates. (Bullish★) (3) According to SMM, a large aluminum plant in Shandong raised the tender price of prebaked anode by 139 yuan/mt MoM in April. The spot price of prebaked anode in April 2025 was 5,205 yuan/mt, with the acceptance price at 5,237 yuan/mt. (Bullish★) (4) According to SMM statistics, the inventory of primary aluminum ingots in mainstream consumption areas in China was 800,000 mt on March 31, down 2,000 mt WoW from last Thursday and down 27,000 mt WoW from last Monday. (Bullish★)

Primary aluminum market: The night session on Thursday saw a sharp decline, with the morning session continuing to trade rangebound. Aluminum prices fell significantly on Friday, as suppliers were reluctant to sell at low prices. Specifically, traders in east China saw a weakening sentiment, with SMM A00 quoted at parity and +10 yuan/mt. On Friday, SMM A00 was at parity with the SHFE aluminum 2504 contract, with SMM A00 aluminum ingots recorded at 20,620 yuan/mt, down 190 yuan/mt from the previous trading day. In central China, the market stood firm on quotes due to the futures market retreat. SMM central China A00 was recorded at 20,540 yuan/mt against the SHFE aluminum 2504 contract, down 170 yuan/mt from the previous trading day, with the Henan-Shanghai price spread at -80 yuan/mt.

Secondary aluminum raw materials: Spot primary aluminum fell sharply by 190 yuan/mt from the previous trading day on Friday, with SMM A00 spot at 20,620 yuan/mt. Aluminum scrap prices generally followed the decline in aluminum prices. On Friday, baled UBC scrap aluminum prices were lowered by 100 yuan/mt to 15,300-16,050 yuan/mt (excluding tax), while shredded aluminum tense scrap prices were lowered by 0-100 yuan/mt to 16,350-17,350 yuan/mt (excluding tax). The decline in scrap aluminum prices was weaker than that of primary aluminum, with the price difference between A00 aluminum and aluminum scrap narrowing slightly. Current downstream demand remains sluggish, with scrap utilization enterprises making just-in-time procurement. Raw material inventories are at low levels, and overall market transactions are moderate. In the short term, scrap aluminum prices may fluctuate rangebound following primary aluminum.

Secondary aluminum alloy: Aluminum prices fell sharply on Friday, with SMM A00 aluminum prices down 190 yuan/mt from the previous trading day to 20,620 yuan/mt. Domestic SMM ADC12 prices were lowered by 100 yuan/mt to the range of 20,900-21,100 yuan/mt. In the import market, overseas ADC12 quotes remained firm above $2,500/mt, with the import window remaining closed. On Friday, aluminum prices gave up the gains of the previous two days, with the secondary aluminum market generally lowering prices by 100 yuan/mt or holding steady. Market transactions were weak. The supply-demand imbalance in the secondary aluminum alloy market has not yet eased, and ADC12 prices will remain under pressure.

Summary: On the macro front, the unexpected acceleration in the US core PCE price index has increased uncertainty in the US economic outlook. The US's new round of tariffs is volatile, disturbing the global aluminum market. On the fundamentals side, the aluminum industry chain remains mainly bullish, with the seasonal destocking trend of "Golden March and Silver April" becoming clearer. Aluminum ingot inventories have sharply declined and are approaching the 800,000 mt mark. End-use consumption in sectors such as NEVs is steadily growing, and downstream restocking demand is also recovering. As the peak consumption season approaches, order volumes and operating rates in most sectors have rebounded, coupled with continued destocking of social aluminum ingot inventories, providing bottom support for aluminum prices. However, the short-term market is still somewhat suppressed by external bearish factors, with the US dollar rebounding to high levels, putting pressure on base metals. Attention is focused on the support level of 20,500 yuan/mt for the most-traded SHFE aluminum contract. Continued close monitoring of macro sentiment changes and the actual release of downstream demand is required.

[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 as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]