SMM Feb. 12: Macro perspective, domestic macro sentiment was generally positive, while overseas expectations for interest rate cuts pulled back. Domestically, the National Bureau of Statistics (NBS) reported that China's CPI rose 0.2% MoM and PPI rose 0.4% MoM in January, easing deflationary pressure. Overseas, US non-farm payrolls increased by 130,000 in January, the unemployment rate fell to 4.3%, and annual figures were revised down by 862,000. The market faced a contradiction between strong single-month data and downward historical revisions, pushing expectations for rate cuts to the second half of the year. US Fed officials struck a hawkish tone, favoring maintaining restrictive interest rates, while Trump continued to pressure the Fed.
Fundamentals, supply side: Domestically, aluminum projects in China and Indonesia steadily ramped up production, but overall February production pulled back MoM from January due to fewer calendar days. Domestically, with the Chinese New Year approaching, downstream demand for raw materials weakened marginally. Combined with high aluminum prices suppressing demand, downstream demand softened further, and enterprises' willingness for casting ingot increased significantly, lowering the proportion of liquid aluminum in February. Although warehouse withdrawals of aluminum ingot in major consumption areas increased YoY this week, social inventory built up by about 35,000 mt WoY from last Thursday.
Overall, bullish sentiment in the nonferrous metals market cooled, and coupled with high inventory pressure fundamentals, aluminum prices remained in the doldrums this week. Affected by the approaching delivery date, the SMM A00 aluminum premiums and discounts were reported at -160 yuan/mt this Thursday, narrowing by about 20 yuan/mt from the previous trading day. Macro sentiment still lacked clear improvement, and high inventory continued to weigh on prices. SHFE aluminum is expected to remain in the doldrums after the Chinese New Year, trading in the range of 22,800–24,000 yuan/mt. LME aluminum is expected to trade between $3,080/mt and $3,180/mt. In addition, be alert to the potential impact of rising alumina prices on aluminum prices after the holiday.
