Alumina Production Resumptions Expected to Increase, Off-Season Demand Caps Upside Potential for Aluminum Prices [SMM Aluminum Futures Brief Commentary]

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SMM, May 16:

Today, the most-traded SHFE aluminum 2507 contract opened at 20,220 yuan/mt, with a high of 20,220 yuan/mt, a low of 20,090 yuan/mt, and closed at 20,130 yuan/mt, down 0.45%. Trading volume was 83,100 lots, and open interest was 204,000 lots.

SMM Commentary: Favourable macro front provides bottom support for aluminum prices, while low inventory further strengthens price resilience. As of May 16, inventories in Guangdong, Wuxi, and Gongyi were 238,000 mt, 168,000 mt, and 53,000 mt respectively, totaling 459,000 mt, down 3,000 mt from the previous day. However, the off-season pressure on the demand side limits upside room. If a breakthrough is achieved in the US-China negotiations on the Section 232 steel and aluminum tariffs, the global aluminum trade flow will be reshaped, and supply pressure in markets outside the US is expected to ease, further boosting market sentiment and supporting aluminum prices.

Today, the most-traded alumina 2509 contract opened at 2,995 yuan/mt, with a high of 2,996 yuan/mt, a low of 2,872 yuan/mt, and closed at 2,890 yuan/mt, down 3.51%. Trading volume was 951,000 lots, and open interest was 343,000 lots.

SMM Commentary: Maintenance and production cuts at alumina enterprises in south China were concentrated this week, with operating capacity decreasing by 2.9 million mt/year on a MoM basis, further tightening spot supply. In addition, alumina enterprises have been facing losses in recent months, with a strong intention to refuse to budge on prices. Coupled with maintenance and production cuts, spot supply has tightened, leading to a significant rebound in spot prices. In the futures market, alumina futures have rebounded strongly, driven by the alumina fundamentals turning to a deficit, as well as news on domestic alumina enterprises' production dynamics, the revocation of mining rights of several miners in Guinea, and favourable macro news. In the short term, due to the concentrated maintenance and production cuts, alumina spot supply is expected to remain tight, and prices are expected to hold up well. As alumina maintenance ends and new capacity is released, combined with the alumina profit recorded at 153 yuan/mt according to SMM's daily cost-profit model, the market has certain expectations for alumina production resumptions. Subsequent attention should be paid to the maintenance, production cuts, and production resumptions of alumina enterprises.

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