Demand Expectations Heat Up, Aluminum Prices Show Intraday Preference [Institutional Commentary]

On Wednesday, the most-traded SHFE aluminum contract closed at 19,860 yuan/mt, up 0.53%. LME aluminum rose 2.22%, closing at $2,443/mt. The average spot price of SMM was 19,910 yuan/mt, up 30 yuan/mt, with a discount of 20 yuan/mt. The average spot price of Nanchu was 19,870 yuan/mt, up 40 yuan/mt, with a discount of 15 yuan/mt. According to SMM, on April 21, aluminum ingot inventory was 673,000 mt, down 16,000 mt WoW. Domestic mainstream consumption areas' aluminum billet inventory was 196,700 mt, down 12,500 mt WoW.

Macro news: The US Fed released the economic status "Beige Book". The Beige Book showed that economic activity has changed little since the last report, but uncertainty about international trade policy was widespread across reports. Only five districts reported slight growth in economic activity, three districts reported that economic activity remained largely unchanged, and the remaining four districts reported a slight decline in economic activity. These remarks may support the view that an interest rate cut will take some time. It is reported that the US President will exempt some US tariffs for automakers. In addition, the US Department of Commerce launched an investigation into truck imports on April 22, citing national security. The US President will also exempt tariffs on steel and aluminum. The preliminary US S&P Global Manufacturing PMI for April was 50.7, expected 49.1, and the final March reading was 50.2. The preliminary Eurozone Manufacturing PMI for April was 48.7, expected 47.5, and the final March reading was 48.6.

On the macro front, the trade war eased and the US and European manufacturing PMI data were stronger than expected, improving demand expectations, and aluminum prices gained short-term support. On the fundamental side, the peak consumption season is nearing its end, demand remains resilient, and stockpiling before the Labour Day holiday is about to begin, with expected good outflows from warehouses. However, suppliers are also actively selling at high aluminum prices, and spot premiums are pulling back quickly. The market is highly uncertain about future consumption and remains cautious. Aluminum prices are testing the pressure at the 20,000 yuan/mt level intraday, but it may be difficult to sustain a continuous upward trend.