Improved macro sentiment combined with pre-holiday destocking led to SHFE aluminum being generally stable with a slight rise [SMM Aluminum Price Weekly Review]

On the macro front, US President Trump delivered a speech on Tuesday (April 22), acknowledging that the current tariffs on Chinese imports are too high and are expected to be significantly reduced. This marks a softening of Trump's stance on his signature tariff policy. He also called for the US Fed to lower interest rates and stated that he has no intention of firing Fed Chairman Powell. On the same day, US Treasury Secretary Besant, speaking at a JPMorgan event, indicated that the tariff war between the US and China would soon cool down. Foreign media reported that the US President would exempt some tariffs for automakers. Additionally, the US President would also exempt tariffs on steel and aluminum. The Wall Street Journal reported that Chinese tariffs might be reduced to 50%-65%. China's Foreign Ministry responded: We do not want to engage in a tariff war with the US, nor are we afraid of it; if the US truly wants to resolve issues through dialogue and negotiation, it should stop threats and coercion and engage with China on the basis of equality, respect, and mutual benefit.

On the fundamental side, the cost side of the aluminum industry remained stable, with the immediate full average cost of aluminum at around 16,582 yuan/mt, up 29 yuan/mt WoW. Demand side showed signs of structural recovery, benefiting from the continuous influx of new orders in May. The overall operating rate of the extrusion industry rose by 1 percentage point WoW to 59.5%, driving pre-holiday stocking demand for raw materials such as aluminum ingots and billets. By sector, although new orders for PV extrusion declined compared to the peak season levels of March-April, the overall drop was controllable, and the actual production pace would need further verification after the Labour Day holiday. The automotive extrusion sector continued to operate in the doldrums, but some companies have already received new orders for popular car models, which will drive subsequent operating rates. In the construction extrusion sector, driven by the continuous release of demand for curtain wall projects, the operating rates of related companies in the industry chain rebounded. Inventory-wise, according to SMM statistics, domestic mainstream consumption areas' aluminum ingot inventory stood at 658,000 mt on April 24, down 31,000 mt WoW, while aluminum billet inventory also decreased by nearly 31,000 mt WoW. SMM expects the destocking trend to continue in late April, with domestic aluminum ingot inventory likely to pull back to 600,000-650,000 mt by month-end, but attention should be paid to the risk of temporary inventory buildup due to concentrated arrivals during the Labour Day holiday.

Overall, the macro environment remains favorable domestically. Yesterday, Trump showed a softening stance on his signature tariff policy towards China, improving market sentiment and stimulating a rebound in the futures market. On the fundamental side, the cost side of the aluminum industry remained stable, while the demand side showed signs of structural recovery, benefiting from the continuous influx of new orders in May, driving pre-holiday stocking demand for raw materials such as aluminum ingots and billets. The reduction in domestic aluminum ingot inventory provided support for aluminum prices, but suppliers were actively selling at higher prices, leading to a pullback in spot premiums. SMM learned that as the transition between the off-peak and peak seasons approaches and the PV installation rush nears its end, downstream aluminum orders are expected to decline, limiting the potential for a significant upward movement in aluminum prices. In the short term, domestic aluminum prices are expected to fluctuate. The most-traded SHFE aluminum 2505 contract is expected to trade between 19,600-20,200 yuan/mt next week, while LME aluminum is expected to trade between $2,370-$2,470/mt.

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