SMM Aluminum Market Morning Comment (Jan 23)

Overnight, the most-traded SHFE 2403 aluminium contract opened at 18,655 yuan/mt, with high and low at 18,680 yuan/t and 18,600 yuan/mt before closing at 18,660 yuan/mt, down 35 yuan/mt or 0.19%. LME aluminum opened at $2,174/mt yesterday, with its high and low at $2180/mt and $2,152.5/mt respectively before closing at $2,155/mt, down by $17.5/mt or 0.81%.

From a macro perspective, MoM surge in US retail sales in December exceeded market expectations and stood at 0.6% (0.40% expected). Sales of motor vehicles, personal health care and catering still maintained high YoY growth. Residential consumption were resilient. The market's expectations for Fed’s interest rate cut in first quarter fell back, the US dollar index rebounded, and commodities were under pressure. Domestically, China’s GDP grew by 5.2% in 2023. In December, total retail sales increased by 7.4% YoY, and the growth rate of added value in industries above the designated size hit a 22-month high. Real estate remained weak, manufacturing investment rebounded, and the overall macroeconomic atmosphere at home and abroad was weak. In terms of fundamentals, domestic aluminum supply has entered a stable period, primary aluminum import windows continue to open, and the net import volume of primary aluminum remains at a high level, impacting domestic market to a certain extent. Domestic primary aluminum social inventories may enter a seasonal inventory accumulation cycle at the end of the month, but considering the industry's aluminum liquid conversion rate of around 70%, it is expected that the total inventory before the CNY holidays this year will be far lower than the same period last year. In the short term, the macroeconomic data at home and abroad perform poorly amid market pessimism, and domestic aluminum downstream industries are entering the off-season,weighing on the aluminum prices.