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3.5 SMM Aluminum Morning Meeting Summary
Futures Market: Overnight, the most-traded SHFE aluminum 2504 contract opened at 20,670 yuan/mt, reached a high of 20,675 yuan/mt, a low of 20,560 yuan/mt, and closed at 20,575 yuan/mt, down 100 yuan/mt or 0.48%. Yesterday, LME aluminum opened at $2,613/mt, hit a high of $2,626/mt, a low of $2,597.5/mt, and closed at $2,622.5/mt, up $11.5/mt or 0.44%.
Macro: (1) Trump stated that Canada’s retaliatory tariffs on the US would immediately trigger the US to "impose equivalent reciprocal tariffs." The US Commerce Secretary mentioned that tariffs could be lifted if countries prove they can stop the flow of fentanyl. The EU strongly condemned the US tariffs on Canada and Mexico. The Commerce Secretary indicated after 5 a.m. today that Trump might compromise on tariffs with Canada and Mexico, potentially announcing reductions tomorrow (bearish★). (2) Due to uncertainties in economic and trade outlooks, the interest rate futures market has fully priced in three US Fed rate cuts in 2025, with a probability of over 50% for a rate cut in May (bullish★). (3) The third session of the 14th National People's Congress held a press conference today (March 4) at the Great Hall of the People, where spokesperson Lou Qinjian answered questions from domestic and foreign reporters regarding the agenda and related issues. Lou introduced that in November 2024, the 12th meeting of the Standing Committee of the 14th National People's Congress approved an additional 6 trillion yuan local government debt limit to replace existing hidden debt. By the end of last year, the 2 trillion yuan replacement bond quota for 2024 had been fully issued, with most regions completing the replacement. The issuance of the 2 trillion yuan replacement bonds for 2025 has already begun, effectively mitigating local government debt risks, ensuring stable local fiscal operations, and supporting high-quality development (bullish★).
Fundamentals: (1) According to SMM statistics, as of March 4, aluminum ingot inventories were 264,500 mt in Guangdong, 328,400 mt in Wuxi, and 152,000 mt in Gongyi, with a total increase of 2,800 mt compared to the previous trading day (bearish★). (2) For domestic aluminum billet inventories, Guangdong recorded 158,800 mt, and Wuxi recorded 73,600 mt, with a total decrease of 1,800 mt (bullish★). (3) According to Monday's LME data, one party controlled up to 90% of aluminum inventory on the London Metal Exchange, valued at approximately $500 million. The exchange did not disclose the identity of the large position holder. As of February 28, total LME aluminum ingot inventory stood at 517,150 mt, with registered warehouse warrants at 206,900 mt and cancelled warrants at 310,250 mt. The current LME futures contracts exhibit a backwardation structure. As of February 21, LME investment funds held 177,961 long positions, the highest level since January 2018 (bullish★). (4) Rio Tinto's New Zealand Aluminum Smelters (NZAS) agreed to delay the restart of the Tiwai Point aluminum smelter until August 31 at the latest to ensure Meridian Energy can secure 50 MW of electricity supply during this winter. The smelter's existing capacity is 365,000 mt, with the restart progress currently at about 70% (bullish★).
Primary Aluminum Market: Last night in the east China market, suppliers who previously held back cargoes became more active in selling due to high futures prices, financial pressure, and profit-driven motives. Spot premiums came under pressure, with SMM A00 aluminum trading at a discount of 10 yuan/mt. SMM A00 aluminum was at a discount of 40 yuan/mt against the SHFE aluminum 2503 contract, down 10 yuan/mt from the previous trading day. SMM A00 aluminum ingot was recorded at 20,600 yuan/mt, down 30 yuan/mt from the previous trading day. In the central China market, suppliers were active in selling during the early session, but downstream buying sentiment weakened due to high futures prices, leading to a price collapse in spot premiums. SMM Central China A00 aluminum was at 20,490 yuan/mt against the SHFE aluminum 2503 contract, down 50 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -110 yuan/mt, with actual market transactions at a discount of around 10 yuan/mt against the SMM Central China price.
Secondary Aluminum Raw Materials: Yesterday, primary aluminum spot prices fell by 30 yuan/mt compared to the previous trading day, with SMM A00 spot aluminum closing at 20,600 yuan/mt. Aluminum scrap prices remained basically flat, with baled UBC aluminum scrap quoted at 15,050-15,850 yuan/mt (excluding tax) and shredded aluminum tense scrap at 16,350-17,950 yuan/mt (excluding tax). As aluminum prices edged down slightly, aluminum scrap prices remained firm, narrowing the price difference between primary metal and scrap. Currently, aluminum scrap traders are actively selling, but downstream scrap utilization enterprises' demand fell short of expectations, leading to bargain down purchasing prices. Overall market transactions were moderate. In the short term, aluminum scrap prices are expected to continue fluctuating rangebound with primary aluminum.
Secondary Aluminum Alloy: Yesterday, aluminum prices gave up the previous day's gains, with SMM A00 aluminum prices down 30 yuan to 20,600 yuan/mt compared to the previous trading day. Secondary aluminum prices remained stable. Domestic SMM ADC12 prices held steady at 21,100-21,300 yuan/mt, while overseas ADC12 prices remained high at $2,480-2,500/mt, with immediate import losses persisting at 200-300 yuan/mt, keeping the import window closed. Yesterday's slight pullback in aluminum prices left the secondary aluminum market relatively stable, with most manufacturers maintaining stable prices, while some reduced prices by 100 yuan/mt. Entering March, the anticipated peak season has not materialized, with manufacturers generally reporting weak order growth. Actual transactions were moderate, performing worse than the same period last year. Weak demand continues to limit the upside room for ADC12 prices. In the short term, ADC12 prices are expected to continue fluctuating rangebound. Future focus should be on changes in raw material market liquidity and the pace of recovery in end-use consumption.
Summary: On the macro side, Canada and Mexico have begun retaliating against Trump's tariff hikes, but the resulting tariff policies remain "unpredictable," with market risk aversion sentiment still spreading. The US dollar index fell to around the 105 mark, facing resistance. Domestically, the issuance of 2 trillion yuan replacement bonds has started, and the Two Sessions are about to convene, with market focus on policy implementation expectations. Fundamentals side, cost support has shown signs of stabilizing, coupled with a steady recovery in downstream operating rates ahead of the traditional "golden March and silver April" peak season. Attention should be paid to the sustained realization of March end-use consumption demand. In terms of inventory, domestic aluminum ingot and billet inventories increased by only 6,500 mt this Monday, indicating a slowdown in inventory buildup, with a turning point in inventory likely approaching. Supply-side pressure is expected to gradually ease. SMM believes that driven by macro sentiment and trading expectations, SHFE aluminum remains more likely to rise than fall. However, concerns over intensified overseas trade frictions warrant close attention to policy expectations during the Two Sessions. In the short term, 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 advice. Clients should make cautious decisions and not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM.】
