Risk aversion sentiment slightly eased, SHFE aluminum mainly fluctuated [Institutional Commentary]

Bullish: 1. The Trump administration suddenly announced the exemption of some Chinese electronics and components from the 125% "reciprocal tariff". The exemption list is applied for by US importers, indicating that the tariff policy has a significant negative impact on the US economy and importers alike. The actual scope of tariff implementation may be weaker than expected.

2. On the spot side, as aluminum prices fell sharply this week, corporate purchasing enthusiasm has increased against the backdrop of the traditional peak consumption season. Domestic aluminum billet and ingot inventories declined significantly this week, with spot premiums/discounts and aluminum billet processing fees rebounding noticeably, providing some fundamental support.

Bearish: 1. US March CPI inflation was below expectations across the board, but current market concerns lie in the uncertainty of Trump's tariff policy. The implementation of Trump's tariff policy will significantly push up domestic inflation in the US, potentially leading to stagflation or even a recession.

2. Spot alumina prices continued to pull back, with the national average cost falling to around 16,543 yuan/mt. Based on this week's spot aluminum prices, profits remain above 3,000. If subsequent tariff impacts lead to weaker demand, aluminum price profits will be compressed.

3. Data from Shanghai Nonferrous Metals shows that the overall operating rate of domestic aluminum downstream processing industries fell 0.38% WoW to 62.2% this week. Performance across sectors diverged, with the aluminum alloy, aluminum plate/sheet, strip and foil, and aluminum extrusion sectors experiencing slight declines in operating rates due to insufficient terminal orders, aluminum price fluctuations, and trade frictions. In contrast, the aluminum wire and cable sector bucked the trend, supported by expectations of Southern Grid tenders. The PV sector maintained full production, with component procurement fluctuations not yet transmitted to the processing end.

Summary: The impact of Trump's tariff policy on the market is not limited to commodity trade; its effects on financial markets continue, especially the credit crisis impact on US Treasuries. Therefore, even as the Trump administration adjusts some tariff policies, macro sentiment remains difficult to shift. Fundamentally, the average spot price of alumina in the north fell below 2,900, with producer maintenance capacity continuing to increase. Meanwhile, warrants in Xinjiang began to be digested, and support below the May contract started to emerge. Aluminum costs continued to pull back to around 16,500, and with uncertain future demand prospects, smelting profits are unlikely to justify higher valuations. However, as the peak season continues, downstream restocking intentions are strong, with aluminum ingot and billet inventories declining noticeably. Aluminum will present a strong reality but weak expectations, and the backwardation structure in the futures market will continue to strengthen.

Strategy: The alumina May contract is expected to trade in the range of 2,750-2,900 yuan/mt, with range trading as the main strategy. The SHFE aluminum June contract is expected to trade in the range of 19,300-20,000 yuan/mt, with range trading as the main strategy. The May-June spread should continue to be held or increased.