SMM February 5 News:
Macro Perspective: Influenced by macro sentiment during the week, commodity prices overall first collapsed and then stabilized. On January 30, Kevin Warsh was nominated as Fed Chairman, sparking market concerns about monetary policy tightening. The US dollar index strengthened significantly, pulling back precious metals and nonferrous metal prices. On February 2, released data showed the US January Manufacturing PMI returned to expansion territory, rising to 52.6, far exceeding the expectation of 48.5; the US dollar index continued its upward trend. Coupled with exchanges collectively raising margins, triggering forced liquidations, precious metals plummeted for a second time, driving down risk appetite in the metal sector. Bulls exited amid a price collapse, and the most-traded SHFE aluminum contract once hit the limit down. In the latter part of the week, domestically, the central bank conducted reverse repo operations to supplement liquidity, easing panic sentiment in the domestic commodity market. Overseas, the US released negotiation signals, and geopolitical conflict tensions eased somewhat, leading to a stabilization in macro sentiment.
Fundamentals: Supply side, the ramp-up of new domestic and overseas aluminum projects pushed up the daily average production. Demand side, on the production front, as the Chinese New Year holiday approaches, downstream processing enterprises successively began holidays, leading to a decline in the operating rate and weakening demand; the proportion of liquid aluminum decreased by 8.6 percentage points WoW. On the trading front, after the absolute price of aluminum fell, traders' bullish sentiment supported an increase in procurement, spot discounts narrowed, and transactions showed slight signs of recovery. However, the social inventory buildup trend persisted, with inventory on Thursday this week increasing by 54,000 mt compared to last Thursday. Inventory pressure is gradually increasing, and the peak social inventory after the Chinese New Year holiday is expected to hit a new high in nearly three years.
Overall, under the influence of previous macro headwinds, a significant amount of capital took profits and exited, leading to a pullback in aluminum prices and a decrease in open interest. However, as precious metals did not show a further downward trend, aluminum prices followed suit and stabilized. In the short term, aluminum prices are expected to consolidate. The most-traded SHFE aluminum contract is forecast to trade within the range of 23,000-23,800 yuan/mt next week, while LME aluminum is expected to trade within the range of $3,000-$3,120/mt.
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