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March 3 SMM Aluminum Morning Meeting Notes
Futures: Overnight, the most-traded SHFE aluminum 2504 contract opened at 20,615 yuan/mt, hitting a high of 20,630 yuan/mt and a low of 20,520 yuan/mt, before closing at 20,545 yuan/mt, down 75 yuan/mt or 0.36%. On Friday, LME aluminum opened at $2,632.5/mt, reached a high of $2,641/mt and a low of $2,600/mt, and closed at $2,604/mt, down $27/mt or 1.03%.
Macro: (1) US personal spending MoM for January recorded -0.2%, marking the largest decline since February 2021 and ending the growth trend since March 2023. The core PCE price index MoM came in at 0.3%, meeting expectations and hitting a new high since October 2024. The core PCE price index YoY recorded 2.6%, a new low since June 2024, also in line with expectations. (Bearish★★) (2) The White House meeting between Trump and Zelensky ended "on a sour note," with Zelensky leaving early and the mineral agreement signing canceled. The US Treasury Secretary stated that there are currently no discussions with Ukraine regarding a mineral agreement. US officials suggested Ukraine might need new leadership, aiming to resolve the conflict through European-led security guarantees. (Neutral) (3) The CPC Central Committee held a meeting to discuss the draft of the "Government Work Report" to be submitted to the third session of the 14th National People's Congress. The meeting emphasized implementing more proactive macro policies, expanding domestic demand, promoting the integration of technological and industrial innovation, stabilizing the real estate and stock markets, and mitigating risks in key areas and external shocks. (Bullish★★)
Fundamentals: (1) According to SMM statistics, as of February 28, aluminum ingot inventories stood at 253,600 mt in Guangdong, 323,200 mt in Wuxi, and 154,400 mt in Gongyi, with total inventories across the three regions increasing by 3,700 mt compared to the previous trading day. (Bearish★) (2) Regarding domestic aluminum billet inventories on February 28, Guangdong's inventory was 156,800 mt, and Wuxi's inventory was 72,900 mt, with a total decrease of 1,700 mt. (Bullish★) (3) Last week, the operating rate of leading domestic downstream aluminum processing enterprises continued its mild post-holiday recovery, rising 1.1 percentage points WoW to 59.8%. (Bullish★)
Primary Aluminum Market: Last Friday morning, the SHFE front-month aluminum contract fluctuated rangebound. Being the weekend, downstream restocking combined with active trading among traders led to improved spot market activity. Specifically, in east China, trading was active, and spot discounts remained unchanged from the previous trading day. Last Friday, SMM A00 aluminum was at a discount of 30 yuan/mt against the SHFE 2503 contract, with SMM A00 aluminum ingot prices recorded at 20,600 yuan/mt, up 50 yuan/mt from the previous trading day. In central China, trading activity improved further over the weekend, with some inventory held as hedging positions, resulting in low circulation rates. Traders took the opportunity to stand firm on quotes. Last Friday, the Henan-Shanghai price spread was at a discount of around 100 yuan/mt, with SMM Central China A00 aluminum recorded at 20,500 yuan/mt, up 60 yuan/mt from the previous trading day.
Secondary Aluminum Raw Materials: Last Friday, primary aluminum spot prices rose by 50 yuan/mt compared to the previous trading day, with SMM A00 spot aluminum closing at 20,600 yuan/mt. Aluminum scrap market quotes fluctuated rangebound with aluminum prices. Last Friday, baled UBC aluminum scrap was quoted at 15,050-15,850 yuan/mt (tax excluded), and shredded aluminum tense scrap was quoted at 16,350-17,950 yuan/mt (liquid aluminum, tax excluded). In the short term, with upstream and downstream resuming production, the pressure on aluminum scrap procurement has eased. However, due to generally weak downstream demand, there has been no significant improvement, and aluminum scrap prices are expected to fluctuate rangebound with primary aluminum.
Secondary Aluminum Alloy: On Friday, aluminum prices rose slightly again, with SMM A00 aluminum prices up 50 yuan/mt from the previous trading day to 20,600 yuan/mt, while secondary aluminum prices remained stable. Domestically, SMM ADC12 prices held steady at 21,100-21,300 yuan/mt. In the import market, overseas ADC12 prices remained stable at $2,480-2,500/mt, with immediate import losses staying within the range of 200-300 yuan/mt, keeping the import window closed. On Friday, aluminum prices saw a slight increase, but secondary aluminum manufacturers continued to maintain stable quotes. Currently, secondary aluminum plant operating rates have returned to normal, with increased market supply. However, weak downstream demand has led to reduced orders, and accumulated social and production site inventories have limited the momentum for price increases. In the short term, ADC12 prices are expected to continue fluctuating rangebound, with upside room constrained by supply pressure and the slow pace of demand recovery, while downside risks are supported by aluminum scrap costs. Attention should be paid to recent raw material circulation and the recovery of end-use consumption.
Summary: On the macro front, last Friday night, US inflation data met expectations, and the US Fed adopted a cautious stance on interest rate cuts, pushing the US dollar index to a nearly two-week high, which pressured base metals. Domestically, the "Government Work Report" proposed implementing accommodative macro policies to expand domestic demand, providing confidence support to the market. On the fundamentals side, cost support has shown signs of stabilization. Coupled with the steady recovery of downstream operating rates ahead of the traditional "golden March and silver April" peak season, attention should be focused on the sustained realization of March end-use consumption demand. As the traditional consumption peak season approaches, inventory turning points are becoming more imminent. Combined with policy guidance, supply-side pressure is expected to ease. SMM believes that driven by macro sentiment and trading expectations, SHFE aluminum remains more likely to rise than fall. The possibility of further developments in tariff-related issues and macroeconomic stimulus leading to unexpected demand cannot be ruled out. Aluminum prices are expected to fluctuate upward at high levels.
[The information provided is for reference only. This article does not constitute direct investment research or decision-making advice. Clients should make decisions cautiously and not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM.]
