Macro sentiment eases, coupled with low inventory supporting aluminum prices; upside room is limited under off-season constraints [SMM Weekly Review of Aluminum Prices]

The macro environment at home and abroad has improved significantly in recent times, injecting confidence into the aluminum market. Internationally, the US and China have suspended most tariffs for 90 days, indicating a positive outlook for global trade. Domestically, the People's Bank of China implemented RRR cuts on May 15, releasing trillion-yuan liquidity to support economic growth. Against this backdrop, bullish and bearish factors are intertwined in the aluminum market, with price trends drawing significant attention.​

I. Cost Side: Fluctuations in Alumina Prices Affecting Aluminum Costs​

On the cost side, as of Thursday (May 15), the immediate average total cost of domestic aluminum production was approximately 16,562 yuan/mt, up 126 yuan/mt from the previous Thursday. The rebound in spot alumina prices was the main driver of the cost increase. However, with the continuous release of new alumina production capacity in regions such as Shanxi and Guangxi, the upside room for alumina prices is expected to be limited in the near term, potentially alleviating cost pressure on aluminum in the medium and long-term.​

II. Supply Side: Capacity Bottlenecks Limiting Aluminum Ingot Growth​

On the supply side, domestic aluminum operating capacity has approached its ceiling. Regional conversion rates of liquid aluminum remain high, with liquid aluminum being directly used in downstream processing, limiting the growth of aluminum ingot output. In particular, the recovery of hydropower in Yunnan has fallen short of expectations, leading to a decline in aluminum ingot shipments from southwest China and exacerbating supply tightness in regional markets, providing bottom support for aluminum prices.​

III. Demand Side: Divergence in Domestic and External Demand, Off-Season Characteristics Emerging​

The demand side shows a clear divergence. In domestic trade, the aluminum semis industry is gradually entering the traditional off-season, with orders in sectors such as construction extrusion and packaging declining MoM. The sluggish real estate market continues to suppress demand. In foreign trade, despite the partial recovery of export orders for some end-users driven by the 90-day tariff window, the scale of recovery is far from offsetting the impact of tariffs, and overall external demand recovery will take time. The demand side faces dual pressures from seasonal weakness and trade uncertainties, making significant growth unlikely in the short term.​

IV. Inventory Side: Historical Lows Supporting Aluminum Prices​

Inventory data, as compiled by SMM, shows that as of May 15, the inventory of aluminum ingots in major domestic consumption areas was 581,000 mt, down 20,000 mt from Monday and 39,000 mt from the previous Thursday. The total inventory of aluminum ingots and billets is at its lowest level for this time of year in recent history. With low inventory levels, liquidity in the spot market is tightening, and suppliers have a strong sentiment to stand firm on quotes, becoming a core supporting factor for aluminum prices.​

V. Outlook: Fluctuating at Highs, Monitoring Key Periods​

Overall, positive macro factors provide bottom support for aluminum prices, with low inventory further strengthening price resilience. However, off-season pressures on the demand side limit upside room. If breakthroughs are achieved in the US-China negotiations on Section 232 steel and aluminum tariffs, global aluminum trade flows will be reshaped, potentially alleviating supply pressures in markets outside the US and further boosting market sentiment.​

It is expected that the operating range of SHFE aluminum next week will be 19,700-20,300 yuan/mt, with a focus on the breakthrough of the previous gap at 20,300 yuan/mt. The operating range of LME aluminum is expected to be $2,450-2,520/mt. Subsequent attention should be paid to the marginal changes in domestic demand, the progress of international trade policies, and the price trend of alumina, as these factors will dominate the short-term fluctuations and medium and long-term trends of aluminum prices.​

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