Trump Wields Tariff Stick, Aluminum Industry Chain's Positive Factors Fail to Mask Short-Term Price Downward Pressure [SMM Aluminum Morning Meeting Summary]

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4.3 SMM Aluminum Morning Meeting Summary

Futures market: Overnight, the most-traded SHFE aluminum 2505 contract opened at 20,455 yuan/mt, with a high of 20,520 yuan/mt, a low of 20,430 yuan/mt, and closed at 20,520 yuan/mt, up 80 yuan/mt, or 0.39%. Yesterday, LME aluminum opened at $2,509/mt, with a high of $2,510/mt, a low of $2,485/mt, and closed at $2,489.5/mt, down $15/mt, or 0.60%.

Macro: (1) On April 2, Eastern Time, Trump announced that the US will set a 10% "minimum benchmark tariff" for all trading partners and impose higher tariffs on several trading partners. Among them, China, the EU, and Japan will be subject to additional tariffs of 34%, 20%, and 24%, respectively; Indonesia, Thailand, Vietnam, and Cambodia will be subject to additional tariffs of 32%, 36%, 46%, and 49%, respectively. Previously, several trading partners have stated that they will take countermeasures in response. (Bearish ★★) (2) Trump stated that the 25% tariff on automobiles will take effect on April 3. (Bearish ★)

Fundamentals: (1) According to SMM statistics, in terms of domestic aluminum billet inventory in two regions, Guangdong aluminum billet inventory was 154,500 mt, Wuxi aluminum billet inventory was 41,000 mt, totaling 195,500 mt, a decrease of 4,700 mt MoM. (Bullish ★); (2) On April 2, LME aluminum inventory recorded 458,800 mt, a decrease of 75 mt from the previous day, a decrease of 0.02%; over the past week, LME aluminum inventory decreased by 14,300 mt, a decrease of 3.02%; over the past month, LME aluminum inventory decreased by 58,300 mt, a decrease of 11.28%. (Bullish ★)

 Primary aluminum market: On Wednesday morning, aluminum prices fluctuated rangebound around 20,450 yuan/mt, and returned to around 20,550 yuan/mt in the second session. In the spot market, some downstream enterprises in east China began pre-holiday restocking, but the market was still impacted by low-priced cargoes and hedging warrants, with SMM A00 trading mainly at parity to a slight discount. SMM A00 was at a premium of 10 yuan/mt against the SHFE aluminum 2504 contract, up 10 yuan/mt from the previous trading day, and SMM A00 aluminum ingot recorded 20,560 yuan/mt, flat from the previous trading day. In the central China market, after a significant decline in aluminum prices, downstream restocking volume increased, and SHFE aluminum shifted to a backwardation structure. With the widening of the spot-futures price spread, suppliers were more active in selling, and the market dropped from a premium of 20 yuan/mt against central China to near parity. Overall, trading in the central China market improved slightly, but attention should be paid to downstream restocking on the last trading day before the holiday. SMM central China A00 recorded 20,490 yuan/mt against the SHFE aluminum 2504 contract, flat from the previous trading day, with the Henan-Shanghai price spread at -70 yuan/mt. Actual market transactions were at parity to a premium of 10 yuan/mt against SMM central China prices, and at -60 yuan/mt against the 2504 contract.

Secondary aluminum raw materials: On Wednesday, spot primary aluminum was flat at 20,560 yuan/mt from the previous trading day, and aluminum scrap prices were largely flat with aluminum prices. On Tuesday, baled UBC scrap aluminum was flat at 15,300-15,850 yuan/mt (excluding tax), and shredded aluminum tense scrap was quoted at 16,250-17,100 yuan/mt (excluding tax). On Tuesday, aluminum scrap prices were largely flat, downstream demand remained sluggish, and scrap utilization enterprises mainly made just-in-time procurement, with overall market transactions being average. In the short term, aluminum scrap prices may follow primary aluminum in fluctuating rangebound.

Secondary aluminum alloy: On Wednesday, SMM A00 aluminum prices were flat at 20,560 yuan/mt from the previous trading day, and domestic SMM ADC12 prices were flat in the range of 20,900-21,100 yuan/mt. Currently, end-use consumption momentum is insufficient, and the downward pressure on aluminum prices is being transmitted, with downstream enterprises generally maintaining just-in-time procurement. Due to insufficient orders, production losses, or financial pressure, some enterprises have begun to reduce operating rates. Considering the balance between cost support and weak demand, it is expected that aluminum alloy prices will maintain a rangebound fluctuation pattern in the short term.

Summary: On the macro front, Trump's latest actions undoubtedly added fuel to the already tense global trade situation. His related measures further intensified trade frictions, significantly reducing market risk appetite, and the entire commodity market was shrouded in uncertainty. On the fundamentals side, the aluminum industry chain remains mainly bullish, with the "golden March and silver April" seasonal destocking trend becoming more evident, and aluminum ingot inventory continuing to decline to around 800,000 mt; end-use consumption such as NEVs is steadily growing, and downstream restocking demand has also warmed up. As the peak consumption season approaches, order volumes and operating rates in most sectors have rebounded, coupled with the continued destocking of social aluminum ingot inventory, providing bottom support for aluminum prices. However, it cannot be ignored that the market is facing severe external pressure in the short term. The US is wielding the tariff stick at will, once again disrupting market order and bringing heavy downward pressure on aluminum prices. In the current context of high macro uncertainty and rising trade protectionism, aluminum price trends have fallen into a dilemma of fluctuating downward in the short term. Continued 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 decisions cautiously and not use this to replace independent judgment. Any decisions made by clients are unrelated to SMM.]