SMM Aluminium Market Morning Comment (Jan 16)

Overnight, the most-traded SHFE 2403 aluminium contract opened at 18,825 yuan/mt, with high and low at 18,910 yuan/t and 18,825 yuan/mt before closing at 18,860 yuan/mt, down 75 yuan/mt or 0.40%. LME aluminium opened at $2,221.5/mt yesterday, with high and low at $2,230/mt and $2,198/mt respectively before closing at $2,200/mt, a drop of $15.5/mt or 0.70%.

On the macro front, the European Central Bank's hawkish tone on Monday cooled down market expectations for interest rate cuts, the US dollar index rose slightly. At the same time, the resurgence of the Red Sea incident is pushing up global shipping prices. In terms of fundamentals, the disturbance in the alumina supply re-emerged, 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. The support for aluminium prices from the supply and demand fell sharply, but the recent strong performance of alumina market drove aluminium prices. SMM predicts that most-traded SHFE aluminium are likely to remain volatile, and we need to pay close attention to the pace of the Federal Reserve's interest rate cuts, domestic consumption and inventory changes.