Macro caution coupled with loose supply and demand keeps aluminum prices in the doldrums [SMM Weekly Aluminum Price Review]

Macro front, overseas "personnel drama" (foreign media reported that Trump planned to fire Powell) triggered market volatility. The short-term weakness of the US dollar drove a slight rebound in base metals, but uncertainties surrounding overseas tariff policies and rumors of personnel changes kept risk assets cautious. Domestically, the capacity replacement policy accelerated the commissioning of hydropower aluminum projects in Yunnan. With the backdrop of the off-season for consumption, the subsequent new supply will further suppress aluminum prices.

On the fundamental front, the aluminum cost side saw a slight weekly increase of 65 yuan/mt to 16,615 yuan/mt due to the rise in spot alumina prices. However, based on current aluminum prices, smelter profits remain considerable. Currently, there is an enhanced expectation for spot delivery and warehousing in the alumina market. Futures prices have given back previous gains, but spot market liquidity remains tight, and spot prices are slow to follow the decline, having limited impact on aluminum costs in the short term.

Supply side remains loose. The capacity released from previous capacity replacements has temporarily come to an end. However, as the off-season deepens, consumption by aluminum semis enterprises has weakened, and the proportion of liquid aluminum has fallen back from highs. Despite the downward shift in aluminum price centers during the week stimulating a brief increase in just-in-time procurement downstream, coupled with short-term inventory fluctuations due to adjustments in the shipment pace of electrolytic aluminum, inventory buildup expectations remain strong amid the off-season.

In the short term, aluminum prices will exhibit a pattern of being in the doldrums. The core logic is that, under the suppression of supply increment releases and the off-season for consumption, inventory buildup expectations remain strong. Currently, there are obvious signs of long position reduction in SHFE aluminum. It is expected that SHFE aluminum will trade within the range of 20,150-20,550 yuan/mt next week, with a core resistance level at 20,500 yuan/mt and support levels at 20,100-20,200 yuan/mt. LME aluminum will fluctuate within the range of $2,520-2,600/mt. There is a high expectation for continuous overseas transfer to delivery warehouse, and LME aluminum inventory will continue to build up, exerting certain pressure on prices.

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