Supporting the private economy: The tug-of-war between sellers and buyers continues amid a volatile pattern

Futures market: Yesterday, the most-traded SHFE aluminium 2504 contract opened at RMB 20,645 per tonne, reached a high of RMB 20,690 per tonne, a low of RMB 20,585 per tonne, and closed at RMB 20,660 per tonne, down RMB 50 per tonne from the previous day, with a 0.24 per cent increase. Yesterday, LME aluminium opened at USD 2,635 per tonne, hit a high of USD 2,651 per tonne, a low of USD 2,613 per tonne, and closed at USD 2,646.5 per tonne, up USD 9 per tonne, with a 0.34 per cent increase.

Macro: (1) US Fed - Harker: The current economic situation supports temporarily maintaining stable interest rate policies; Bowman: Before another interest rate cut, stronger confidence in inflation decline is needed. Inflation is expected to decline, but upside risks remain. (Bearish ★)

(2) Jinping Xi: The development prospects of the private economy are broad and promising, and it is the right time for private enterprises and entrepreneurs to showcase their capabilities. (Bullish ★★)

(3) The 14th Session of the Standing Committee of the 14th National People's Congress will be held in Beijing from February 24 to 25 to review the draft law on promoting the private economy and the draft amendment to the Civil Aviation Law submitted by the State Council. (Bullish ★) 

Fundamentals: (1) According to SMM statistics, aluminium ingot outflows from warehouses totaled 100,500 tonnes during 2.11-2.16, an increase of 30,000 tonnes compared to the Chinese New Year holiday period. Aluminium billet outflows from warehouses totalled 44,200 tonnes during 2.11-2.16, an increase of 27,100 tonnes compared to the Chinese New Year holiday period. (Bullish ★)

(2) On February 17, domestic mainstream consumption area aluminium ingot inventory stood at 818,000 tonnes, up 55,000 tonnes from last Thursday. (Bearish ★)

(3) Domestic mainstream consumption area aluminium billet inventory reached 307,000 tonnes, up 6,600 tonnes from last Thursday. (Bearish ★)

Primary aluminium market: Yesterday morning, the most-traded SHFE aluminium contract centre slightly shifted downward, fluctuating around RMB 20,550 per tonne. In the East China market, aluminium prices rose to high levels, weakening downstream restocking sentiment, with most transactions being demand-driven.

However, during the morning session, the SHFE aluminium front-month and next-month contract price spread fluctuated between C10 and B10, with traders standing firm on quotes, leaving limited room for downside in premiums. SMM A00 aluminium ingot was quoted at a discount of RMB 50 per tonne to the SHFE aluminium 2502 contract, down RMB 10 per tonne from the previous trading day. SMM A00 aluminium ingot recorded RMB 20,540 per tonne, down RMB 60 per tonne from the previous trading day.

Secondary aluminium raw materials: Aluminium scrap market quotes slightly declined. Yesterday, baled UBC aluminium scrap quotes dropped by RMB 0-50 per tonne to RMB 15,150-15,950 per tonne (excluding tax), while shredded aluminium tense scrap quotes fell by RMB 0-100 per tonne to RMB 16,650-18,150 per tonne (liquid aluminium, excluding tax).

In the short term, the aluminium scrap fundamentals are steadily recovering, with downstream procurement demand gradually picking up and market transactions continuing to improve. The short-term price difference between primary metal and scrap is expected to remain volatile.

Secondary aluminium alloy: Yesterday, secondary aluminium alloy prices remained stable. Domestically, SMM ADC12 prices held steady at RMB 21,200-21,400 per tonne. In the import market, overseas ADC12 prices were in the range of USD 2,420-2,460 per tonne. Due to the strengthening of the yuan exchange rate, the immediate profit per ton for imported ADC12 expanded to over RMB 200.

With aluminium prices fluctuating within a narrow range, the secondary aluminium market showed little volatility, and manufacturers mostly maintained stable pricing. Recently, with traders resuming work and an increase in overseas imports, the circulation of aluminium scrap in the market has increased, slightly easing cost pressure for secondary aluminium plants, though costs remain high overall.

Current downstream demand recovery is slightly slower than expected, which may limit the upside room for prices. In the short term, secondary aluminium alloy prices are expected to follow aluminium prices in narrow fluctuations.

Summary: Recently, macro factors have been mixed. Domestically, efforts to boost consumption continue, while overseas trade barriers are intensifying. However, domestic enterprises and market sentiment have shown limited response to this.

In the short term, the global aluminium market is expected to undergo structural adjustments influenced by policies, and attention should be paid to changes in European and American trade policies and major consumer market demand. Fundamentals side, the pressure of resuming production in the aluminium supply side has re-emerged, with domestic operating capacity of aluminium expected to rise slowly in February.

Alumina average spot prices continue to weaken, driving aluminium costs further downward, and weakening cost-side support. Despite both supply and demand showing growth and post-holiday demand recovery exceeding expectations, aluminium futures and spot prices remain strong even as cost support diminishes. Inventory-wise, the market is still in a post-holiday inventory buildup phase, with inventories expected to continue rising rapidly this week.

Demand side, the operating rate of leading domestic aluminium downstream processing enterprises significantly rebounded this week, up 5.7 percentage points W-o-W to 56.8 per cent, mainly driven by the post-Chinese New Year resumption of production. However, recovery across sectors remains uneven. In the future, with increasing PV demand and full resumption of production by end-users, and limited supply-side increments, aluminium prices are expected to maintain high-level fluctuations in the short term.

Source: SMM