Geopolitical Support Remained Solid, Aluminum Prices Fluctuated at Highs [SMM Aluminum Morning Meeting Minutes]

4.13 SMM Morning Meeting Minutes

Futures:SHFE aluminum closed at 24,705 yuan/mt in the night session, up 0.32%. The price stood above all moving averages (MA5=24,653, MA10=24,691, MA40=24,366, MA60=24,365), with the moving average system in a bullish oscillating alignment. The MACD indicator DIF (93.1) and DEA (72.82) formed a golden cross upward, with both lines rising in tandem, red bars continuing to expand, and bullish momentum steadily strengthening. The suggested key trading range for SHFE aluminum is 24,550-25,100. LME aluminum closed at $3,515/mt, up 5.50%. The price stood above all moving averages MA5 (3,483.7), MA10 (3,457.7), MA40 (3,299.47), and MA60 (3,244.38), with the moving average system in a bullish alignment, confirming a short-term strong rebound pattern. The MACD indicator DIF (65.12) and DEA (55.14) formed a golden cross, with both lines rising in tandem. The suggested key trading range for LME aluminum is 3,400-3,550.

Macro Front:Iranian Foreign Minister Araghchi posted on social media on the 13th, stating that the Iran-US negotiations recently held in Islamabad, the capital of Pakistan, were only "one step away" from reaching an agreement. The US side demanded too much, with constantly changing requirements, and threatened to impose a blockade. In the short term, the impact of Middle East conflicts on Iran persists, and vigilance is needed against changes in the war situation. The US core PCE price index rose 3% YoY in February, narrowing slightly from the previous reading of 3.1%, in line with market expectations. Services inflation slowed down significantly, with real spending up only 0.1% MoM. US initial jobless claims increased by 16,000 to 219,000 last week, higher than market expectations.

Fundamentals:Supply side, ex-China, directly impacted by geopolitical conflicts, Middle Eastern aluminum enterprises cut production. Recently, UAE's EGA and Bahrain's Alba were successively hit by missile strikes, with production facilities damaged. The extent of damage is still under comprehensive assessment. The market widely expects large-scale production cuts or even shutdowns, with the global aluminum supply gap expected to widen and ex-China supply concerns continuing to escalate. LME inventory maintained a downward trend, with the latest data showing destocking to 399,200 mt. The share of available Russian aluminum inventory in LME warehouses surged from 60% in February to 92% in March. In China, the proportion of liquid aluminum rebounded in March as downstream enterprises fully resumed work after the holiday, up significantly by 9.3 percentage points MoM to 73.7%, higher than early-month expectations. Entering the traditional peak consumption season in April, downstream operating rates continued to rise, and the proportion of liquid aluminum is expected to climb further. Inventory side, high aluminum prices in China suppressed downstream willingness to actively restock. Downstream enterprises generally purchased as needed based on orders, maintaining low inventory operations, with no large-scale stockpiling behavior for the time being. On Monday this week, social inventory of aluminum ingots in China saw an inventory buildup of 11,000 mt WoW, with short-term inventory remaining at a relatively ample level.

Primary aluminum market:In early trading, SHFE aluminum 2604 fluctuated upward, with the trading center rising from the previous day. Affected by rising aluminum prices, buyers showed low acceptance of high-priced aluminum ingots, pushing sellers to lower their offers, and transaction premiums continued to widen. Market transactions mainly centered around the SMM A00 aluminum average discount price. Last Friday, the shipment sentiment index in east China was 3.25, flat WoW; the procurement sentiment index was 3.01, down 0.24 WoW. Last Friday, futures prices of aluminum rebounded somewhat, and the overall market trading atmosphere remained sluggish. However, as it was the weekend, downstream processing enterprises showed a slight recovery in stockpiling sentiment. Additionally, some state-owned enterprises unwound earlier arbitrage positions with large shipments, loosening available cargoes in the market, and actual trading volume increased from the previous day. Ultimately, the actual transaction price range in central China hovered between a premium of 40 yuan and a discount of 10 yuan to the central China price. Last Friday, the shipment sentiment index in central China was 2.76, up 0.02 WoW; the procurement sentiment index was 2.44, up 0.04 WoW.

Aluminum scrap:Last Friday, spot primary aluminum rebounded 140 yuan/mt from the previous trading day, and the aluminum scrap market generally followed the uptrend. Last Friday, the tightening regulatory stance on the "reverse invoicing" policy remained unchanged, with compliance costs in the aluminum scrap recycling process staying elevated, and actually available invoiced cargoes remaining tight. Demand side, the divergence in shipments between aluminum tense scrap and wrought aluminum alloy scrap intensified. For aluminum tense scrap-based materials such as shredded aluminum tense scrap and ADC12 aluminum shavings, downstream scrap utilization enterprises including secondary alloy producers mostly maintained purchasing as needed with low inventory operations. For wrought aluminum alloy scrap-based materials such as baled UBC and 5-series/3-series plate and off-cuts, downstream secondary aluminum plate/sheet and strip enterprises were in peak production season with relatively high stockpiling enthusiasm. However, overall, high prices combined with wild swings in aluminum prices continued to suppress the purchasing enthusiasm of scrap utilization enterprises. Price spread side, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was recorded at 2,960 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 1,670 yuan/mt. The aluminum scrap market is expected to hover at highs this week, with the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) around 20,800-21,300 yuan/mt (tax-exclusive). Supply side, policy constraints are unlikely to ease in the short term, and tight compliant cargoes combined with yards holding back cargoes will continue to underpin prices. Demand side, the divergence between aluminum tense scrap and wrought aluminum alloy scrap will persist. Primary aluminum remains volatile due to factors such as Middle East geopolitical conflicts, and coupled with a lackluster recovery in downstream peak season demand, the overall tug-of-war between sellers and buyers will continue. Caution is warranted against market risks arising from high aluminum price fluctuations and constrained cargo circulation.

Secondary aluminum alloy:Spot cargo side, last Friday ADC12 market quotes were generally raised by 100 yuan/mt, mainly driven by the rebound in primary aluminum prices and rising costs. After a period of continuous decline, industry profit margins narrowed significantly, and enterprises had certain demands for price recovery. From the transaction side, downstream demand had not yet improved notably, with procurement maintaining a rigid-demand pace and relatively limited acceptance of price increases, as the market overall remained dominated by passive follow-on buying. In the short term, against the backdrop of no significant demand recovery, upward momentum may be relatively constrained.

Aluminum Market Summary:Macro front, supply side, the substantive damage caused earlier was irreversible. Aluminum capacity in the Middle East suffered direct military strikes, with UAE's EGA and Bahrain's Alba successively attacked and production facilities damaged. The global aluminum supply gap expectations expanded significantly, and ex-China supply concerns continued to escalate. Meanwhile, China entered the traditional peak consumption season, with the proportion of liquid aluminum rebounding sharply to 73.7%, downstream operating rates rising steadily, and demand-side support remaining solid. Overall, macro perspective risks of strait passage restrictions and conflict escalation, combined with fundamental supply hard damage and low global inventory, created resonance, jointly providing strong bottom support for aluminum prices. However, weak interest rate cut expectations, higher-than-expected aluminum ingot inventory buildup in China, and adverse expectations on consumption and inflation from recent high fluctuations in oil prices all notably weighed on the upside room for aluminum prices, with aluminum prices fluctuating at highs in the short term.

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