The macro front was relatively positive, boosting aluminum prices. China's CPI rose YoY in February. The State Council issued an action plan to promote large-scale equipment renewals and trade-ins of consumer goods, boosting market confidence and promoting economic recovery. Attitude towards cutting interest rates still swung in overseas markets. European Central Bank officials expressed their intention to cut interest rates. The unexpected rise in US CPI data in February once again dampened the Fed's short-term interest rate cut expectations.
Fundamentals: Domestic aluminum operating capacity was around 41.92 million mt in the week. Enterprises in Yunnan Province were encouraged to use electricity, and a safe and stable supply plan has been formulated. However, the final power supply plan has not yet been confirmed. There has been no production resumption in the province in the week. It is expected that some companies may restart a small amount of potlines by the end of March, but there is still uncertainty over power supply during dry season. SMM predicts that large-scale production resumption is unlikely to happen until May. The Guizhou Provincial Department of Industry and Information Technology issued a notice titled "Guiding Opinions on Promoting High-Quality Development of the Aluminum Industry." The notice stated that illegal new aluminum capacity will be strictly prohibited, and electrolytic cells below 400kA should be eliminated in an orderly manner. In May 2023, Guizhou Anshun Aluminum Industry stopped production for technical transformation, which has been smooth. The new potlines have been installed. It is expected that there may be production resumption at the end of the month, totaling 130,000 mt. Domestic spot alumina transaction prices fell slightly in the week, and the immediate cost of domestic aluminum dropped by 17 yuan/mt MoM to 16,825 yuan/mt. High spot aluminum prices drove the industry's immediate profit to rebound to around 2,434 yuan/mt. Overseas: Spot premiums for aluminum ingots rose recently in Asia, with shipments in Southeast Asia concentrated at around $140/mt. The market expects Japan’s port premiums to increase by $145-155/mt in the second quarter. Domestic downstream aluminum operating rate continued to recover in the week. Operating rate of extrusion in north China improved, but the scheduling time is short, and future orders may be insufficient. Due to fierce competition and low profits, orders flowed to large and medium-sized enterprises with cost advantages. The operating rate diverged significantly.
From a technical perspective, the model predicts that the price range of the closing price of most-traded SHFE aluminum contract will be [18,770, 19,285], the price center will be 19,040, the unit is yuan/mt, the extreme price range will be [18,580, 19,540], the normal price range will be [18,710，19,370], and the conservative price range will be [18,830, 19,200]. The prices are expected to move up. The support range will be [18,710, 18,830], and the resistance range will be [19,200，19,370]. The model predicts that the range of the average price of SMM A00 aluminum will be [18,855, 19,395], with the price center of 19,120, and the unit is yuan/mt. The extreme price range will be [18,580, 19,650], the normal price range will be [18,760, 19,480], and the conservative price range will be [18,950, 19,310]. The price is expected to pull back after an initial rise or go up. The support range will be [18,760，18,950], and the resistance range will be [19,310，19,480].
On the macro front, the US core CPI in February was higher than expectations. The market expects that the Fed may keep interest rates unchanged in March, and the US dollar index may be rangebound. State Council issued the "Action Plan" to promote the upgrade of equipment in key industries and municipal infrastructure, boosting market expectations for aluminum consumption. Fundamentally, on the domestic supply, there have been small amount of production cuts in Inner Mongolia and Sichuan, totalling about 100,000 mt. However, we still need to pay attention to the expected production resumption in Yunnan and Guizhou. The aluminum cost somewhat declined due to weak demand and prices. The downstream demand is still growing. The growth of domestic aluminum social inventories slows down, and the inventory may begin to decline this week. The supply is still expected to grow amid bullish macro front, and the cost has declined. The demand improvement expectations still need to be realized. Open interest of SHFE aluminum grew significantly. SMM predicts that SHFE aluminum will fluctuate between 18,760-19,480 yuan/mt, and LME aluminum may fluctuate between $2,200-2,320/mt this week. We need to pay attention to aluminum supply, recovery of consumption, and when aluminum ingot stocks will begin to drop.
