3.2 SMM Morning Briefing Summary
Futures: In the night session on March 19, the SHFE aluminum 2605 contract opened at 23,100 yuan/mt, hit an intraday high of 24,020 yuan/mt and a low of 23,100 yuan/mt, and finally closed at 23,930 yuan/mt, down 250 yuan/mt from the previous close, a decline of 1.03%. Technical analysis showed that the MA lines indicated short-term weakness and a medium-term bullish pattern. SMA5 (24,332.82) < SMA10 (24,630.78), with both lines turning downward, suggesting that short-term bullish momentum had weakened significantly and the downtrend was clear; medium and long-term moving averages SMA20 (24,753.45) > SMA40 (24,627.32) > SMA60 (24,462.93), with the medium and long-term moving averages still diverging upward, indicated that the medium-term bullish structure had not been fully damaged, but support had weakened substantially. On the 4-hour candlestick chart, the MACD green bars continued to expand (DIFF: -16.72, DEA: 143.6, STICK: -320.64). The DIFF line crossed below the DEA line to form a death cross, indicating that bearish momentum had strengthened significantly and short-term correction pressure had intensified. In terms of open interest, night-session open interest was about 285,000 lots, down 7,320 lots from the previous session. On March 19, LME aluminum opened at $3,426.0/mt, with a high of $3,432.0/mt, a low of $3,115.0/mt, and a close of $3,242.0/mt, down 5.19% from the previous day. Trading volume was 65,028 lots, an increase of 29,465 lots, and open interest was 689,000 lots, an increase of 12,905 lots.
Macro front: On Wednesday, both the US Fed and the Bank of Canada decided to keep interest rates unchanged; on Thursday, the Bank of Japan, the Bank of England, the European Central Bank, as well as the central banks of Switzerland and Sweden, made the same decision. These central banks clearly stated that they would remain vigilant, concerned that rising energy prices could trigger a wave of inflation across the broader economy. (Bearish ★) According to CME FedWatch, the probability of a 25-bp rate hike by the US Fed in April was 7.2%, while the probability of keeping rates unchanged was 92.8%. By June, the probability of cumulative 25-bp hikes by the US Fed was 9.2%, the probability of cumulative 50-bp hikes was 0.2%, and the probability of keeping rates unchanged was 90.6%. (Bearish ★)
Fundamentals: This week, the weekly operating rate of leading downstream aluminum processing enterprises in China edged up 1 percentage point WoW to 62.9%, with peak-season conditions emerging slightly and demand seeing some release. On inventory, as of Thursday this week, aluminum ingot inventory in major consumption areas in China stood at 1.339 million mt, with an inventory buildup of 45,000 mt from last Thursday. Aluminum casting ingot output in March was expected to remain high. In the short term, the inventory buildup trend in China’s aluminum ingot social inventory was expected to continue, with the post-holiday peak still likely to reach 1.35-1.4 million mt.
Primary Aluminum Market: SHFE aluminum 2603 fluctuated downward in early trading, with the price center falling sharply from the previous trading day. Affected by the decline in aluminum prices, overall purchasing sentiment rose yesterday. Sellers held prices firm, and yesterday’s mainstream quotations and transaction prices were concentrated around the average price to +10 yuan/mt. Yesterday, the east China market shipment sentiment index was 3.24, up 0.08 MoM; the purchasing sentiment index was 3.16, up 0.13 MoM. Yesterday, SHFE aluminum futures prices extended their decline, and buying sentiment in the central China market was strong. Traders and downstream processing enterprises were both bullish, tending to purchase at low prices and moderately stockpile. In addition, suppliers showed a strong willingness to hold prices firm, and transaction premiums showed no weakening trend. Ultimately, quotations in the central China market were concentrated at premiums of 10-40 yuan/mt over the central China price, while actual transaction prices were mainly concentrated at premiums of 20-30 yuan/mt over the central China price. Yesterday, the shipment sentiment index in the central China market was 2.59, flat MoM; the purchasing sentiment index was 2.43, up 0.01 MoM.
Aluminum Scrap: Yesterday, spot primary aluminum edged down 20 yuan/mt from the previous trading day, while the aluminum scrap market held steady, with some regions recouping the declines of the previous two days. In terms of the price difference between A00 aluminum and aluminum scrap, on March 18, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,528 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,506 yuan/mt. Supply side, tighter regulatory oversight under the “reverse invoicing” policy sharply increased tax compliance costs in the aluminum scrap recycling segment. In some regions, because operating procedures have not yet been fully streamlined, the supply of actually compliant and invoiced circulating cargo remained tight, and supply-side elasticity was significantly weakened by policy friction. Demand side, although the market is in the traditional peak consumption season of “Golden March and Silver April,” aluminum prices fluctuating at highs severely squeezed downstream profit margins. Order acceptance among scrap utilization enterprises fell to a freezing point, willingness for large-scale restocking was absent, and most maintained just-in-time procurement, with signs of underperforming in peak season emerging. The aluminum scrap market is expected to remain in the doldrums at highs next week, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) running around 20,200-20,800 yuan/mt (excluding tax). The US-Iran geopolitical conflict remains the main bullish factor for primary aluminum, but inventory at high levels of aluminum ingot in China constrains upside room for aluminum prices, dragging the overall aluminum scrap market into the doldrums at highs. On the supply side, regulatory policies such as reverse invoicing are unlikely to see any substantive easing in the short term, compliance costs in the aluminum scrap recycling segment remain elevated, and raw material circulation efficiency continues to be suppressed. On the demand side, expectations of weak aluminum price performance will slightly weigh on the purchasing sentiment of traders and downstream scrap utilization enterprises. In addition, the “Golden March and Silver April” peak season has fallen short of expectations, the release pace of terminal orders has lagged significantly behind the seasonal pattern, and downstream scrap utilization enterprises mostly purchase as needed, lacking momentum for large-scale restocking. In the short term, close attention is still needed on the impact of geopolitical conflicts on primary aluminum price fluctuations, the actual recovery of end-user orders, and the actual implementation progress of supply-side policies, with vigilance against the risk of wild swings in prices at elevated levels.
Secondary Aluminum Alloy:Futures, the 2604 aluminum alloy contract in yesterday's daytime session opened higher and then moved in a one-way decline overall. It opened at 23,530 yuan/mt in early trading, fluctuated briefly, then started to plunge before noon. The decline widened further in the afternoon, with a low of 22,910 yuan/mt. It rebounded slightly late in the session and finally closed at 23,000 yuan, down 570 yuan from the previous settlement price, or 2.42%. Technically, the daily candlestick formed a large bearish candlestick, breaking below short-term moving average support. The RSI pulled back below the neutral range, indicating a short-term weak pattern, and market sentiment was bearish. In the spot market, before noon, affected by the narrowing fluctuation in aluminum prices, enterprises showed limited willingness to adjust prices, and quotations were broadly stable. Demand remained weak, with downstream procurement mainly for restocking rigid demand. Trading performance was mediocre, and wait-and-see sentiment was strong. In the afternoon, as futures plunged, market quotations followed lower by 100-200 yuan/mt. In the short term, under the dual pressure of weak aluminum prices and sluggish demand, ADC12 prices are expected to remain in a narrow and weak rangebound pattern, though downside room is relatively limited due to cost support.
Aluminum Market Summary:At present, macro geopolitical risks in the global aluminum market have yet to subside. The Middle East situation remained in a stalemate, threats to navigation through the Strait of Hormuz remained unresolved, and aluminum enterprises in the region faced two-way disruptions to both raw material imports and product exports. The stability of the global aluminum supply chain was under pressure, and the risk premium persisted, though the earlier risk premium within the week partially retreated amid easing sentiment and profit-taking by bulls. Affected by stronger-than-expected US employment and inflation data, market expectations for interest rate cuts were pushed back significantly, with the first rate cut this year likely delayed until late Q3 to Q4. A stronger US dollar, coupled with tighter liquidity expectations, continued to weigh on bulk commodity valuations. Fundamentally, expectations for aluminum production cuts outside China still remained. In Europe, the Middle East, and elsewhere, some capacity entered maintenance cycles amid disruptions from energy and logistics factors, and the logic of global supply contraction remained intact. In China, aluminum operating remained stable, supply-side increment was limited, and the overall market stayed steady. After the holiday, China demand entered a gradual recovery channel, the proportion of direct supply of liquid aluminum increased, and the operating rate of downstream processing enterprises rebounded MoM, with the industry gradually returning to its normal production pace. Among them, demand from PV, packaging, and power grid remained strong, forming the core support. Construction extrusion slowly recovered with the progress of work resumption, while the recovery pace in traditional sectors was relatively mild, and overall end-user support gradually strengthened. Continued destocking in LME inventory provided bottom support for LME aluminum, but amid tightening fund liquidity and profit-taking by bulls, upside momentum was insufficient, and the backwardation structure weakened somewhat. China's social inventory rose to a near five-year high for the same period, and the inventory buildup cycle has not yet ended. High inventory and weak fundamentals jointly suppressed upward momentum. Divergence between domestic and overseas drivers continued, and the SHFE/LME price ratio kept weakening, with prices likely to remain under pressure in the short term.
[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions prudently and should not use this as a replacement for their own independent judgment. Any decisions made by clients are unrelated to SMM.]
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