3.16 SMM Morning Meeting Summary
Futures: In the night session on March 13, the SHFE aluminum 2605 contract opened at 25,130 yuan/mt, hit an intraday high of 25,200 yuan/mt and a low of 24,960 yuan/mt, and finally closed at 24,965 yuan/mt, down 105 yuan/mt, or 0.42%, from the previous close. Technically, the MA lines remained in a bullish alignment, with SMA5 (25,121.02) > SMA10 (25,117.08) > SMA20 (24,911.32) > SMA40 (24,600.18) > SMA60 (24,389.26). The short-term moving averages (5/10-day) were still above the medium and long-term moving averages, indicating a bullish medium-term trend. However, the 5-day moving average was only marginally above the 10-day moving average and had turned downward, suggesting some weakening in short-term bullish momentum. On the 4-hour candlestick chart, MACD turned into a green histogram (DIFF: 282.97, DEA: 296.81, STICK: -27.69). The DIFF line crossed below the DEA line, forming a death cross, indicating fading short-term bullish momentum and correction pressure on prices. In terms of open interest, night session open interest was დაახლოებით 305,000 lots, down 640 lots from the daytime session. On March 13, LME aluminum opened at $3,525/mt, rose to a high of $3,528.5/mt, fell to a low of $3,420.5/mt, and closed at $3,439/mt, down 2.66% from the previous day. Trading volume was 33,592 lots, down 8,639 lots, while open interest stood at 680,000 lots, down 5,382 lots.
Macro Front: US core PCE inflation for January rose as expected on a YoY basis, while real GDP for Q4 last year was unexpectedly revised down sharply. Specifically, the US personal consumption expenditures (PCE) price index rose 0.3% MoM in January, in line with expectations; the YoY increase came in at 2.8%, while analysts had previously expected it to remain unchanged at 2.9%. (Bearish ★) The central bank's February financial statistics report showed that at month-end February, broad money (M2) balance stood at 349.22 trillion yuan, up 9% YoY; aggregate social financing increased by a cumulative 9.6 trillion yuan in the first two months, 316.2 billion yuan more than in the same period last year; and new RMB loans totaled 5.61 trillion yuan in the first two months. (Bullish ★)
Fundamentals: According to SMM statistics, the operating rate of aluminum billet in February fell sharply by 9.2 percentage points MoM to 41.4%, and was down 7.7 percentage points YoY. China aluminum billet production in March is expected to rebound sharply to around 1.5 million mt, with the operating rate expected to recover to about 55.7%, likely returning to the peak-season level seen in the same period in previous years. According to Alba's official website on March 15, Aluminum Bahrain (Alba) has safely and orderly initiated the shutdown process for Potlines 1, 2, and 3, involving 19% of its total capacity of 1.623 million mt, with the aim of optimizing the utilization of Alba's existing raw material inventory and prioritizing the stable operation of Potlines 4, 5, and 6.
Primary Aluminum Market: The SHFE aluminum 04 contract fluctuated at highs after opening last Friday. High aluminum prices suppressed downstream demand, and overall purchasing demand remained weak, while market premiums continued to soften. Market premiums kept declining from the opening. Last Friday, mainstream market quotations and transaction prices were concentrated between -20 yuan/mt and the average price. Last Friday, the east China market shipment sentiment index was 3.32, flat WoW; the purchasing sentiment index was 2.55, down 0.02 WoW. Last Friday, trading sentiment in the central China market remained sluggish. As it coincided with the weekend, market buying sentiment improved slightly, but constrained by high aluminum prices, downstream processing enterprises still showed low enthusiasm for picking up goods, and actual trading volume was limited, with only traders restocking when premiums were low. In the end, actual transaction prices in the central China market were around parity with the central China price to a discount of 20 yuan/mt against the central China price. Last Friday, the central China market shipment sentiment index was 2.67, flat WoW; the purchasing sentiment index was 2.34, down 0.02 WoW.
Secondary Aluminum Raw Material: Continued fluctuations in geopolitical risks drove spot primary aluminum to pull back 140 yuan/mt last Friday from the previous trading day, and the aluminum scrap market fell across the board. In terms of the price difference between A00 aluminum and aluminum scrap, as of March 13, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,560 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,646 yuan/mt. Although it is currently the traditional peak season, affected by weaker-than-expected recovery in terminal orders and wild swings in prices, the production pace of China’s aluminum scrap yards and downstream scrap utilization enterprises has remained lukewarm, and actual raw material restocking has fallen short of expectations. On the policy front, secondary enterprises lack clear expectations for the specific operating rules of “reverse invoicing,” and aluminum scrap circulation is set to tighten further. The aluminum scrap market is expected to maintain a high-level, firm fluctuation range next week, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) running around 20,600-21,400 yuan/mt (excluding tax). Primary aluminum will still be the core driver under the influence of the geopolitical situation, and the risk of price fluctuations is intensifying. On the supply side, cargo supply is being released steadily, but policy uncertainty continues to weigh on circulation efficiency. On the demand side, the recovery pace in the peak season is relatively slow, while high prices and wild swings continue to suppress purchase willingness. In the short term, close attention should be paid to primary aluminum price trends amid developments in geopolitical conflicts, the recovery of downstream orders, and the implementation of secondary recycling policies, while guarding against the risk of a sharp pullback from highs.
Secondary Aluminum Alloy: In futures, the aluminum alloy 2604 contract last Friday generally showed a pattern of opening high, retreating after a rapid rise, and accelerating downward into the close. It opened higher at 23,990 yuan/mt in early trading and once climbed to 24,060 yuan/mt intraday before fluctuating lower. In the afternoon session, bulls cut positions, and prices accelerated downward, hitting a low of 23,620 yuan/mt. Prices rebounded slightly into the close and finally settled at 23,655 yuan/mt, down 335 yuan/mt from the previous trading day, a decline of 1.40%. Trading volume was 5,842 lots, down 1,020 lots from the previous trading day; open interest was 5,679 lots, down 195 lots. Technically, the price fell below support from short-term moving averages, indicating emerging short-term pullback pressure. Attention should be paid to support near the previous low of 21,755 yuan/mt below. In the spot market, quotations in the secondary aluminum alloy market were mainly stable last Friday. Before noon, fluctuations in futures narrowed, and enterprises showed a notably weaker willingness to adjust prices, with most producers choosing to hold quotes steady and wait. In the afternoon, as futures fluctuated downward, some producers began to lower quotations by 100 yuan/mt. Demand side, downstream buyers still mainly made just-in-time procurement, but amid the pullback in aluminum prices and the approaching weekend, some enterprises showed slightly improved purchasing enthusiasm, and market transactions improved somewhat from the previous day. In the short term, raw material costs remain at highs, providing relatively strong support for ADC12 prices; however, if prices continue to rise, the suppressive effect of high prices on demand will become increasingly evident. At the same time, as operating rates gradually recover, the supply side is also expected to see a mild increase. ADC12 prices are expected to fluctuate at highs in the short term. Going forward, focus is recommended on the pace of downstream order release, pressure on the market from the supply recovery process, and the impact of the Middle East situation on aluminum prices.
Aluminum Market Summary:Overall, macro geopolitical risks have not subsided. The Middle East remains in a stalemate, threats to navigation through the Strait of Hormuz persist, and the risk premium in the global aluminum supply chain remains in place. In China, demand has gradually recovered after the holiday, with the proportion of liquid aluminum and downstream operating rates rebounding MoM. Demand from PV, packaging, and the power grid was strong, construction extrusion recovered slowly, and end-user support gradually strengthened. Against the backdrop of continued tightening LME liquidity, LME aluminum still has upward momentum, with strong support from prices outside China, and is likely to maintain a backwardation structure in the short term. China, by contrast, remains in a phase of high inventory plus weak spot fundamentals, with upward momentum clearly weaker than outside China. Amid diverging domestic and overseas drivers, the SHFE/LME price ratio is expected to continue weakening, and aluminum prices are expected to fluctuate at highs 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.]
