SMM Morning Review - 2011/3/3 Aluminum Market

Aluminum futures rebounded on Monday, leaving the central China spot market subdued. Sluggish end-use demand, coupled with strong bearish sentiment among downstream processing enterprises, weakened buying sentiment, while suppliers showed no notable willingness to hold prices firm. As a result, actual transaction prices in the central China market hovered around a discount of 60-80 yuan/mt against the SHFE aluminum 07 contract, with a continued downward trend.

[Overseas Macro Bullishness Battles Supply Bearishness, China's Destocking Supports SHFE Aluminum Bottom] On the domestic front, bullish factors are prominent. The proportion of liquid aluminum has continued to rise. Over the past week, aluminum ingot warehouse withdrawals hit a four-year high, and the pace of inventory destocking has accelerated significantly, forming support for the bottom of SHFE aluminum. Amid the interplay of bullish and bearish factors, overseas, the bullish impact of the US dollar and the bearish forces from supply and geopolitics offset each other. After its earlier excessive decline, LME aluminum's downward momentum has slowed, and in the short term, it is mainly consolidating at lows for repair; domestically, supported by rapid destocking, the probability of underperforming LME aluminum is low. The SHFE and LME markets may show slight divergence, and a sustained unilateral weak trend is unlikely.