4.3 SMM Morning Meeting Summary
Futures: In the night session on April 2, the SHFE aluminum 2605 contract opened at 24,545 yuan/mt, hit an intraday high of 24,795 yuan/mt and a low of 24,500 yuan/mt, and finally closed at 24,710 yuan/mt, down 10 yuan/mt from the previous close, or 0.04%. Technical analysis showed that the short-term moving averages (SMA5: 24,740.71; SMA10: 24,630.53) had turned downward, indicating weakening short-term bullish momentum. The medium-term moving averages (SMA20: 24,483.63; SMA40: 24,431.25; SMA60: 24,371.46) remained in a bullish alignment, suggesting that medium-term support still existed. On the 4-hour candlestick chart, the MACD red bars continued to shorten (DIFF=107.48, DEA=11.76, STICK=191.45), indicating further fading bullish momentum. In terms of open interest, night-session open interest was about 236,000 lots, down 253 lots from the previous reading. On April 2, LME aluminum opened at $3,523.5/mt, reached an intraday high of $3,525.5/mt and a low of $3,428.0/mt, and finally closed at $3,465.5/mt, down 1.76% from the previous day. In terms of open interest, night-session open interest was about 678,000 lots, down 5,318 lots from the previous reading.
Macro Front: At a regular press conference held on the 2nd, Ministry of Commerce spokesperson He Yadong, in response to a question on China-US economic and trade relations, said that since last year, under the strategic guidance of the important consensus reached by the two heads of state, China and the US had gone through six rounds of economic and trade consultations and achieved a series of outcomes in the economic and trade field, injecting more stability and certainty into bilateral economic and trade relations and the world economy. (Bullish ★) According to CME FedWatch, the probability of the US Fed raising interest rates by 25 basis points in April was 0.5%, while the probability of keeping rates unchanged was 99.5%. By June, the probability of a cumulative 25-basis-point interest rate cut was 6.0%, the probability of keeping rates unchanged was 93.5%, and the probability of a cumulative 25-basis-point rate hike was 0.5%. (Bearish ★)
Fundamentals: This week, against the backdrop of continuously rising aluminum prices, overall trading sentiment in the spot aluminum market showed divergence, with shipment sentiment generally stronger than buying sentiment, and ample spot cargo circulating in the market. SMM A00 aluminum spot premiums widened somewhat WoW. On the downstream side, the weekly operating rate of leading China aluminum downstream processing enterprises rebounded 1.2 percentage points WoW to 65.2%. Overall, it showed a slow rebound and divergence across segments. The industry as a whole still remained in a pattern of “slow recovery, underperform in peak season,” with limited upside room for short-term operating rates.
Primary Aluminum Market: In the morning session, SHFE aluminum 2604 fluctuated upward, with its center moving higher than the previous day. Affected by high aluminum prices, shipping sentiment was stronger than buying sentiment, while downstream end-users showed weak purchase sentiment and available cargoes were relatively ample. Market transactions were mainly concentrated at discounts of 10 yuan/mt to the average price for SMM A00 aluminum. Yesterday, the east China market shipping sentiment index was 3.43, up 0.02 MoM; the buying sentiment index was 3.01, up 0.01 MoM. Aluminum futures prices remained at highs, and in the central China market, traders were overall more bullish than bearish. Although downstream orders were not enough to support excessive stockpiling, traders were relatively active in purchasing for hedging purposes. After the initial stage, sellers reduced shipments, and higher-priced purchasing increased, driving market quotes and transaction prices higher all the way. Ultimately, actual transaction prices in the central China market ranged from a discount of 40 yuan to the central China price to a premium of 10 yuan to the central China price. Yesterday, the central China market shipping sentiment index was 2.79, up 0.03 MoM; the buying sentiment index was 2.44, up 0.02 MoM.
Aluminum Scrap:Yesterday, spot primary aluminum edged up 30 yuan/mt from the previous trading day, while the aluminum scrap market was largely stable overall. Yesterday, regulatory tightening under the "reverse invoicing" policy remained unchanged, compliance costs in the aluminum scrap recycling segment stayed elevated, and actual available cargoes with invoices were still tight. Demand side, the traditional peak consumption season of "Golden March and Silver April" fell short of expectations, and scrap utilization enterprises such as downstream secondary alloy producers mostly maintained purchasing as needed and low inventory operations. High prices, coupled with continued wild swings in aluminum prices, continued to suppress procurement enthusiasm among scrap utilization enterprises, leaving overall market transactions sluggish and extending the pattern of "underperforming in peak season." The aluminum scrap market is expected to hover at highs and fluctuate upward next week, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) expected to run around 20,800-21,300 yuan/mt (excluding tax). Supply side, regulatory policies such as "reverse invoicing" are unlikely to see any substantive easing in the short term, and tight compliant cargoes, together with continued sentiment among yards to hold back cargoes, will continue to provide bottom support for prices. Demand side, recovery in the peak season has fallen short of expectations, momentum for recovery in terminal orders remains insufficient, and the pattern of just-in-time procurement is expected to continue. In the short term, close attention is needed on the actual impact of Middle East geopolitical conflicts on global aluminum plant capacity, downstream terminal orders, and the implementation progress of the reverse invoicing policy, while remaining alert to the risk of wild swings in aluminum prices at highs.
Secondary Aluminum Alloy:In futures, before noon yesterday, the most-traded aluminum alloy 2605 contract retreated after rapid rise and fluctuated downward. After the morning session opened, prices rose rapidly and touched an intraday high of 23,795 yuan/mt, then came under pressure and pulled back. A sharp intraday drop followed, with prices falling to a low of 23,525 yuan/mt, before moving sideways at low levels in the afternoon. As of the midday close, it was quoted at 23,660 yuan/mt, down 70 yuan from the previous trading day's settlement price, a decline of 0.29%. In the spot market, ADC12 market prices yesterday remained largely stable, with a small number of enterprises slightly lowering their quotations. Yesterday, aluminum price fluctuations narrowed, with limited drive from the cost side. Enterprises generally lacked the willingness to proactively adjust prices, and most maintained stable prices while taking a wait-and-see approach. Demand side, downstream performance has yet to show any clear improvement, and some enterprises hold relatively cautious or even slightly pessimistic expectations for April demand. Against the backdrop of weakening cost support and diverging demand expectations, ADC12 prices are likely to continue moving sideways in a narrow range in the short term.
Aluminum Market Summary:Currently, macro geopolitical risks in the global aluminum market continue to escalate, with risk premiums remaining at high levels and becoming the core variable dominating market sentiment. Fundamentally, on the supply side, supply outside China has been directly impacted by geopolitical conflicts, with Middle Eastern aluminum enterprises cutting production. Recently, UAE's EGA and Bahrain's Alba were hit by missile attacks one after another, damaging production facilities. The extent of the damage is still under comprehensive assessment, and the market generally expects large-scale production cuts or even shutdowns, widening expectations for a global aluminum supply gap and further intensifying concerns over outside China supply. On the demand side, as April marks the traditional peak consumption season, downstream operating rates continue to rise, and the proportion of liquid aluminum is expected to increase further. On the inventory side, entering early April, although warehouse withdrawals of aluminum ingot in China have strengthened somewhat over the past week, the inflection point in China's aluminum ingot inventory has not appeared as expected. Currently, China's aluminum ingot inventory shows clear divergence among major consumption regions, but during the traditional peak season, the performance and expectations for the proportion of liquid aluminum in China remain relatively optimistic. Coupled with the resonance of rigid downstream demand support and favorable export expectations, the trend inflection point for China's aluminum social inventory will be delayed to around mid-April. Overall, the core focus for the later market is whether core aluminum plants in the Middle East will further expand production cuts. If production cuts continue to materialize, they will provide strong upward momentum for global aluminum prices. Together with expected support from the gradual release of peak-season demand in China, aluminum prices are expected to remain in a high-level adjustment pattern 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 substitute for their own independent judgment. Any decisions made by clients are unrelated to SMM.]
