SHFE aluminium weakly consolidates as alumina prices slightly collapse

On February 12, 2025, the most-traded SHFE aluminium 2503 contract opened at RMB 20,610 per tonne, with a high of RMB 20,690 per tonne and a low of RMB 20,520 per tonne, closing at RMB 20,575 per tonne, down 0.48 per cent. Trading volume was 96,000 lots, and open interest was 159,000 lots.

On the macro front, the EU intensified sanctions, and the US imposed tariff pressures. In the short term, the global aluminium market will undergo structural adjustments due to policy impacts, requiring continuous attention to the dynamics of EU-US trade policies and changes in demand from major consumer markets. The previous day, the Shanghai municipal government held a meeting with foreign financial institutions to promote high-level financial opening-up, providing some confidence to the financial market.

On the fundamentals side, the pressure of aluminium supply resumption has re-emerged, with domestic aluminium operating capacity expected to rise slowly in February. The average spot price of alumina continued to weaken, driving aluminium costs to extend their downward trend. As of now, aluminium costs have fallen below RMB 17,300 per tonne, with industry profits exceeding RMB 3,300 per tonne. Inventory-wise, it remains in a post-holiday inventory buildup phase, with inventories expected to continue increasing rapidly this week. Demand side, the operating rate of leading aluminium processing enterprises rose 5.7 percentage points W-o-W to 56.8 per cent.

Although it is currently the off-season, operating rates of aluminium plate/sheet, strip and foil, secondary alloy, and extrusion enterprises have all increased, especially with top-tier automotive extrusion enterprises accelerating their resumption of operations, providing support for demand. Meanwhile, due to financial constraints and fewer orders on hand before the holiday, extrusion enterprises stockpiled relatively less, which may lead to some stockpiling sentiment after the holiday. With the end of the Chinese New Year holiday, aluminium processing enterprises are gradually resuming production, and the consumer market is expected to recover progressively. In the near term, the focus should be on the impact of tariff events, post-holiday aluminium ingot inventory changes, and the pace of downstream resumption. SHFE aluminium is expected to fluctuate at highs in the short term.

On February 12, 2025, the most-traded alumina 2505 contract opened at RMB 3,445 per tonne, with a high of RMB 3,458 per tonne and a low of RMB 3,372 per tonne, closing at RMB 3,387 per tonne, down 2.19 per cent. Trading volume was 133,000 lots, and open interest was 163,000 lots.

Overall, in the short term, the alumina operating capacity continues to increase, and the alumina spot market supply is relatively ample compared to earlier periods. Domestic alumina prices are continuously declining, while overseas alumina spot transaction prices have stabilized. Model calculations show that imported alumina losses exceed RMB 1,000, and the domestic alumina export window may gradually open. In the short term, there are no clear expectations for alumina production cuts, and supply remains stable. Some aluminium production cuts or technological transformation capacities in southwest China may gradually resume production, with demand slightly rebounding, but it is unlikely to reverse the relatively ample alumina spot market. Moving forward, attention should be paid to domestic alumina exports, bauxite prices, and supply conditions.

Source: SMM