China Aluminum Ingot Inventory Inflection Point Remains Unclear, Widening Ex-China Supply Gap Supports LME Aluminum [SMM Aluminum Morning Meeting Minutes]

4.20 SMM Morning Meeting Minutes

Futures:SHFE aluminum closed at 25,185 yuan/mt, down 1.25%. Price broke below MA5 (25,247) but remained above MA10 (24,988), MA30 (24,738.83), and MA60 (24,468.83), under short-term pressure while the medium-term bullish structure remained intact. MACD indicator DIF (230.16) and DEA (155.77) maintained a golden cross above the zero axis, with the histogram narrowing to 148.78, indicating weakening upward momentum. The suggested core trading range for SHFE aluminum is 24,900-25,400. LME aluminum closed at $3,576.5/mt, up 0.89%. Price traded above all moving averages, with MA5 and MA10 in a standard bullish alignment. MACD indicator DIF (82.94) and DEA (75.46) showed a golden cross pointing upward, with a positive histogram (14.95), indicating sustained but weakening upward momentum. The suggested core trading range for LME aluminum is 3,540-3,600.

Macro front:US President Trump stated that Iran had "seriously violated" the ceasefire agreement, but he still believed a peace deal could be reached with Iran. Velayati, the Supreme Leader of Iran's foreign affairs advisor, stated that the security of the Strait of Hormuz and the Strait of Malacca is currently "controlled by Iran and its strategic partners," and the security of the Bab el-Mandeb Strait is "in the hands of Yemen's Houthi forces." Any provocative actions would trigger a chain reaction.

Fundamentals:Supply side, affected by large-scale production cuts at Middle Eastern aluminum smelters, ex-China aluminum fundamentals showed a clear supply gap; price trends showed LME aluminum outperforming SHFE aluminum, with the SHFE/LME price ratio declining, import losses widening, and China's net primary aluminum imports expected to decrease. However, as operating aluminum capacity in China stayed high, the supply-side fundamentals had not yet shown a clear gap. Demand side, affected by reduced aluminum supply, surging energy costs, and tight oil supply, some downstream processors outside China cut or suspended production; in China, as the peak season deepened, downstream operating rates rebounded, coupled with incremental export orders for some aluminum products, demand was moderate. However, aluminum billet processing fees performed weakly, with some billet plants cutting production, and overall aluminum billet operating rates rebounded below expectations. Overall, liquid aluminum weekly operating rate declined by 0.08 percentage points last week. On Monday, nationwide aluminum ingot social inventory saw an inventory buildup of 30,000 mt WoW Thursday, of which Wuxi saw an aluminum ingot inventory buildup of 18,000 mt WoW Thursday. Whether the social inventory inflection point will arrive smoothly deserves attention.

Primary Aluminum Market:Last Friday morning, SHFE aluminum 2605 contract fluctuated downward, but overall aluminum prices remained at high levels. Driven by downstream stockpiling on Friday, overall market purchasing sentiment rose. However, affected by high aluminum prices, downstream price acceptance remained low. Mainstream transactions were concentrated in the range of SMMA00 aluminum minus 10 yuan/mt to the average price. Last Friday, the east China market shipment sentiment index was 3.71, flat MoM; the procurement sentiment index was 3.05, up 0.09 MoM. Last Friday, aluminum prices continued to fluctuate at high levels. The trading atmosphere in the central China market remained relatively subdued, but with weekend stockpiling approaching, trading volume rose compared to the previous two days. Last Friday, major and retail traders had significant price divergences, with market prices scattered. Leading major traders quoted between parity with the central China price and a discount of 10 yuan to the central China price, while retail traders quoted at a discount of 30-50 yuan to the central China price. Ultimately, concentrated quotes settled at a discount of 20 yuan to the central China price. Last Friday, the central China market shipment sentiment index was 2.85, flat MoM; the procurement sentiment index was 2.32, up 0.02 MoM.

Aluminum scrap:The US-Iran conflict disrupted passage through the Strait of Hormuz, driving capital sentiment and pushing aluminum prices higher. Last Friday, spot primary aluminum edged up slightly from the previous trading day, while aluminum scrap market prices saw minor adjustments. Supply side, regulatory enforcement of the "reverse invoicing" policy continued to tighten, compliance costs in the aluminum scrap recycling chain remained elevated, and actually available invoiced sources remained tight. Yards held back from selling with strong sentiment to hold prices firm, and some regional traders adopted a wait-and-see approach on high-priced sources with locked volumes, resulting in low actual market circulation. Demand side, the "Golden March, Silver April" peak season demand remained lackluster. Downstream aluminum tense scrap-based scrap utilization enterprises continued to maintain strategies of purchasing as needed with low inventory operations, with limited willingness to accept high-priced resources, and overall procurement pace remained conservative. Wrought aluminum alloy scrap-based enterprises were in their production peak season with relatively higher stockpiling enthusiasm, but price support remained limited. Aluminum scrap market is expected to continue holding up well at high levels this week, with shredded aluminum tense scrap (priced based on aluminum content) mainstream range expected to operate around 21,000-21,500 (tax-exclusive). Supply side policy constraints are unlikely to ease in the short term, and the tight pattern of compliant sources will persist. The Strait of Hormuz passage risk triggered by the US-Iran conflict has not fully subsided, and elevated aluminum prices along with yards' sentiment to hold back from selling provide floor support for prices. However, demand-side peak season recovery fell below expectations, with downstream scrap utilization enterprises generally maintaining low inventory and purchasing-as-needed strategies, and high prices suppressed overall transactions. In the short term, continued attention should be paid to the actual impact of the US-Iran conflict on aluminum price fluctuations and expectations for end-user order recovery, with vigilance against the risk of aluminum prices retreating after rapid rise.

Secondary aluminum alloy:Spot cargo side, last Friday ADC12 market prices were mostly stable. The upward momentum in primary aluminum prices slowed, and cost side drivers weakened. Meanwhile, downstream demand remained persistently weak, with procurement focused on rigid demand. Against the backdrop of ample low-priced sources and intensifying price competition, enterprises generally lacked motivation to raise quoted prices. However, the purchasing behavior of futures-spot traders provided some support for market liquidity. In the short term, ADC12 prices are expected to continue moving sideways with limited upside room, and close attention should be paid to the recovery on the demand side and further cost guidance from aluminum price fluctuations.

Aluminum Market Summary:Macro front, the US and Iran held divergent views on the ceasefire agreement. Trump claimed Iran was in "serious violation" but peace talks remained possible, while Iran firmly asserted its control over key straits such as Hormuz. Geopolitical risk premiums stayed high, providing sustained support for aluminum prices. Ex-China, large-scale production cuts at Middle Eastern aluminum smelters widened the supply gap. LME aluminum rose sharply, the SHFE/LME price ratio declined, import losses widened, and China's net primary aluminum imports are expected to decrease, strengthening the transmission support from LME to SHFE aluminum. China's demand side, the peak-season rebound in downstream operating rates, combined with incremental export orders, showed moderate performance. However, weak aluminum billet processing fees led to production cuts at some enterprises, and the weekly operating rate of liquid aluminum edged down by 0.08 percentage points, indicating that China's consumption recovery was not broadly robust. Overall, the Middle East negotiation process remained fraught with twists and turns, but the ex-China supply gap and continued LME inventory drawdowns supported LME prices to hold up well. Meanwhile, China's aluminum ingot inventory remained at high levels, and attention should be paid to whether the inflection point in China's inventory can materialize smoothly.

[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make prudent decisions and not use this as a substitute for independent judgment. Any decisions made by clients are not related to SMM.]