Macro Situation Is Volatile, Aluminum Market Is Intertwined With Bullish and Bearish Factors, and Future Trend Is More Likely to Rise Than Fall [SMM Aluminum Morning Meeting Summary]

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2.28 SMM Aluminum Morning Meeting Summary

Futures Market: Overnight, the most-traded SHFE aluminum 2504 contract opened at 20,620 yuan/mt, hit a high of 20,720 yuan/mt, a low of 20,620 yuan/mt, and closed at 20,655 yuan/mt, up 85 yuan/mt or 0.41%. Yesterday, LME aluminum opened at $2,633.5/mt, reached a high of $2,652/mt, a low of $2,620/mt, and closed at $2,631/mt, up $3/mt or 0.11%. 

Macro: (1) The US GDP growth in Q4 2024 remained robust, driven by rising service costs, with the key PCE inflation rate revised up to 2.7%. (Bullish ★) (2) Trump stated that the 25% tariff on goods from Canada and Mexico will take effect on March 4. During a meeting with UK Prime Minister Starmer, Trump mentioned that if a trade agreement with the UK is reached, there would be no need to impose additional tariffs on the country. India is reportedly considering lowering tariffs on goods such as automobiles and chemicals to avoid reciprocal tariffs from the US. (Bearish ★)

Fundamentals: (1) On February 27, SMM reported that aluminum inventory in the Shanghai Bonded Zone was 64,800 mt, and in the Guangdong Bonded Zone was 12,700 mt, with a total inventory of 77,500 mt, up 2,300 mt WoW. (Bearish ★); (2) According to SMM, aluminum ingot inventory in major domestic consumption areas was 873,000 mt on February 27, flat compared to Monday; aluminum billet inventory in major domestic consumption areas was 312,700 mt, down 8,000 mt compared to Monday. (Bullish ★) 

Primary Aluminum Market: On Thursday morning, the SHFE front-month aluminum contract fluctuated upward, supported by expectations of reduced in-transit cargoes and a recovery in consumption during the "golden March and silver April" period. Specifically, trading in east China was active, with spot discounts flat compared to the previous trading day. On Thursday, SMM A00 aluminum recorded a discount of 30 yuan/mt against the SHFE aluminum 2503 contract, with SMM A00 aluminum ingot prices at 20,550 yuan/mt, up 20 yuan/mt from the previous trading day. In central China, although inventory in Gongyi remains high, the anticipated decline in in-transit cargoes combined with expectations for "golden March and silver April" has led to a noticeable sentiment among suppliers to stand firm on quotes. From the perspective of processed material consumption, aluminum prices pulling back has led to some just-in-time procurement, but the YoY growth in new orders for March is expected to be limited. Downstream enterprises remain cautious about raw material inventory turnover, showing low acceptance of the 20 yuan/mt premium in central China. On Thursday, the Henan-Shanghai price spread was around a discount of 110 yuan/mt, with SMM central China A00 aluminum recording 20,440 yuan/mt, up 30 yuan/mt from the previous trading day.

Aluminum Scrap Market: On Thursday, primary aluminum spot prices rose by 20 yuan/mt compared to the previous trading day, with SMM A00 spot aluminum closing at 20,550 yuan/mt. Aluminum scrap market prices fluctuated rangebound, with baled UBC aluminum scrap quoted at 14,950-15,800 yuan/mt (excluding tax) and shredded aluminum tense scrap quoted at 16,350-17,950 yuan/mt (liquid aluminum, excluding tax). In the short term, the resumption of production in the aluminum scrap upstream and downstream sectors has eased procurement pressure, but downstream demand remains weak with no significant improvement. Aluminum scrap prices are expected to fluctuate rangebound following primary aluminum.

Secondary Aluminum Alloy: On Thursday, aluminum prices continued their mild upward trend, with SMM A00 aluminum prices rising by 20 yuan/mt from the previous trading day to 20,550 yuan/mt, while secondary aluminum prices remained stable. Domestically, SMM ADC12 prices held steady at 21,100-21,300 yuan/mt. In the import market, overseas ADC12 prices remained stable at $2,480-2,500/mt, with ADC12 import immediate losses slightly expanding to the range of 200-300 yuan/mt, keeping the import window closed. On Thursday, aluminum prices saw a slight increase, but secondary aluminum manufacturers mainly maintained stable quotes, with a few reducing prices by 50-100 yuan/mt against the trend. Currently, secondary aluminum plant operating rates have returned to normal, with increased market supply. However, weak downstream demand, reduced enterprise orders, and accumulating social and production site inventory have limited the momentum for price increases. In the short term, ADC12 prices are expected to continue fluctuating rangebound, with upside room constrained by supply pressure and the slow pace of demand recovery, while downside support comes from aluminum scrap costs. Attention should be paid to recent raw material circulation and the recovery of end-use consumption.

Summary: Macro side, Russia's plan to resume aluminum product exports to the US may help narrow the price spread between domestic and overseas markets. The US's inconsistent stance on tariffs has created market uncertainty, with Trump's tariff threats fueling inflation concerns. Interest rate cut expectations remain unpredictable. As March approaches, the domestic market will focus on the upcoming "Two Sessions" to set economic growth targets and consumption-boosting policies. Fundamentals side, cost support has slightly stabilized, and downstream operating rates are showing mild post-holiday recovery ahead of "golden March and silver April." Attention should be paid to whether end-use consumption can sustain momentum in March. Most suppliers are optimistic about aluminum prices, expecting inventory turning points to emerge gradually in March. With policy support, aluminum ingot inventory may remain low in the long term, and east China has already started destocking, with spot market sentiment to hold back cargoes strengthening. SMM believes that driven by macro sentiment and trading expectations, SHFE aluminum is more likely to rise than fall. The possibility of aluminum prices reaching 21,000 yuan/mt cannot be ruled out, especially if tariff issues continue to escalate and macro stimulus leads to stronger-than-expected demand.

 【The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make cautious decisions and not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM.】