The global macro environment presents a weak balance with high fluctuations, while inventory continues to exert pressure, limiting the upside room for aluminum prices [SMM Aluminum Price Weekly Review].

SMM February 26 News:

From a macro perspective,overseas, the US Supreme Court announced a ruling on a tariff lawsuit, determining that the US government's imposition of reciprocal tariffs, fentanyl tariffs, and other related tariffs on relevant trading partners under the International Emergency Economic Powers Act (IEEPA) was illegal. US Customs and Border Protection (CBP) announced that it would stop collecting tariffs levied under IEEPA starting from 2:00 AM Eastern Time on February 24. However, according to CCTV News, US Trade Representative Jamison Greer stated on February 25 that the US "global import tariff" rate on certain countries would increase from the recently implemented 10% to 15% or higher, but he did not disclose any specific trading partners or other details. Fed official Collins said recent employment data was encouraging, the stability of the job market has strengthened, inflation is expected to pull back within the year, and she is seeking more evidence to confirm that the disinflation process has restarted. According to CME's "FedWatch Tool": the probability of the Fed cutting interest rates by 25 basis points in March is 2.0%, and the probability of keeping rates unchanged is 98.0%. The probability of a cumulative 25 basis point rate cut by April is 15.9%, the probability of unchanged rates is 83.8%, and the probability of a cumulative 50 basis point cut is 0.3%. The probability of a cumulative 25 basis point cut by June is 42.7%. Domestically, on the afternoon of February 25, President Xi Jinping met with German Chancellor Merz, proposing three points regarding China-Germany relations: mutual support, openness and mutual benefit, and people-to-people affinity, to promote the stable development of bilateral relations.

From a fundamental perspective,on the supply side, domestic and Indonesian aluminum projects are steadily ramping up production, but affected by fewer natural days in February, overall February production decreased MoM compared to January. Looking ahead to 2026, the supply growth trend continues; Mt. Holly aluminum plant's 50,000 mt idle capacity is expected to resume production in April, reaching full capacity by the end of Q2; the Iceland aluminum plant is expected to resume production earlier than originally planned, starting at the end of April 2026 and recovering to near full capacity by the end of July. Cost side, post-holiday aluminum real-time cost was basically stable compared to pre-holiday, while aluminum's real-time theoretical profit increased by 162 yuan/mt MoM to 7,274 yuan/mt. Demand side, post-holiday operating rates for downstream processing extrusions showed a steady recovery pace; extrusion enterprises gradually entered the stage of resuming work and production, with operating rates significantly rebounding by 11.5 percentage points MoM to 37%, indicating accelerated work resumption. Construction extrusion remained weak, while PV extrusion maintained high operating rates, and further rebound is expected next week; except for the primary aluminum alloy sector, all other downstream sectors concentrated on post-holiday production resumptions, with operating rates rebounding to varying degrees, but overall progress was slow, and end-user orders were not yet fully released. Entering March, as the industry chain's post-holiday production resumption deepened, the industry's operating rate was expected to recover to pre-holiday normal levels, showing a steady rebound trend in the short term. Inventory-wise, domestic mainstream consumption area aluminum ingot inventory reported 1.157 million mt this Thursday, a cumulative increase of 265,000 mt compared to pre-holiday (February 12). Notably, affected by concentrated cargo arrivals around the Chinese New Year, warehouse capacity in domestic mainstream consumption areas remained tight, coupled with labor shortages at stations and freight yards, leading to significantly limited inbound efficiency. SMM expected the national aluminum ingot inventory peak to remain around 1.35-1.4 million mt, likely occurring in mid-to-late March.

Overall, during the Chinese New Year holiday, the US ruled IEEPA tariffs illegal and suspended them on February 24, temporarily easing market concerns over trade friction and improving risk appetite, which helped form a neutral-to-bullish global macro environment, potentially providing a relatively stable external backdrop for the post-holiday commodity market. However, the US subsequently announced an increase in the "global import tariff" from 10% to 15% or higher, while the US Fed signaled caution, boosting short-term interest rate expectations and strengthening the US dollar. Ongoing uncertainties in US-Iran geopolitics and tariff policies heightened risk-off sentiment, coupled with slowing US economic resilience and weak Eurozone recovery, resulting in a fragile, high-volatility global macro balance. Seasonal fundamental pressures remained prominent. Supply side, domestic and overseas aluminum new projects steadily ramped up, while the liquid aluminum conversion ratio stayed low. Demand side, post-holiday downstream processing material operating rates showed a steady recovery pace. However, under the influence of seasonal supply exceeding demand and some cargo backlog at railway stations, domestic aluminum ingot inventory was expected to peak above 1.35 million mt after the holiday, hitting a five-year high, which would be a major factor suppressing price rises. Overall, aluminum prices showed a pattern of falling first then rising around the Chinese New Year. The SHFE aluminum was expected to hold up well in the short term, with the most-traded contract forecast to trade between 23,500-24,300 yuan/mt next week, while LME aluminum was expected to range between $3,080-3,220/mt.

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