SMM Aluminum Market Morning Comment (Jan 18)

Overnight, the most-traded SHFE 2403 aluminium contract opened at 18,810 yuan/mt, with high and low at 18,815 yuan/t and 18,730 yuan/mt before closing at 18,760 yuan/mt, down 110 yuan/mt or 0.58%. LME aluminum opened at $2,215/mt on Wednesday, with high and low at $2,217/mt and $2,175/mt respectively before closing at $2,176/mt, a drop of $24/mt or 1.09%.

On the macro front, the US data on Wednesday exceeded expectations, which once again cooled down market expectations for interest rate cuts, and the US dollar index continued to rise; the resurgence of the Red Sea incident is pushing up global shipping prices. In terms of fundamentals, the disturbance in the alumina supply still existed, domestic aluminium smelters maintained stable operation, the amount of aluminium ingot produced was expected to increase MoM in January, and imported aluminium ingots may increase. In addition, the aluminium market may enter a traditional inventory accumulation amid low-season, but domestic aluminium ingot inventories continued to remain low. The shipment increased thanks to pre-holiday stockpiling, thus the total inventory may be difficult to exceed level in the same period of 2023. While the support for aluminium prices from fundamentals has weakened, high alumina prices have offered solid cost support. SMM predicts that most-traded SHFE aluminium are likely to drift sideways, and we need to pay close attention to the pace of the Federal Reserve's interest rate cuts, domestic consumption and inventory changes.