Tariffs on Mexico finalised, SHFE aluminium weakens due to alumina drag

Today, the most-traded SHFE aluminium 2504 contract opened at RMB 20,600 per tonne, with a high of RMB 20,660 per tonne and a low of RMB 20,560 per tonne, closing at RMB 20,620 per tonne, up 0.22 per cent. The trading volume was 77,000 lots, and the open interest was 183,000 lots.

SMM Comments: The macro environment recently presented a mixed picture. North American trade frictions continued to escalate, with Trump announcing reciprocal countermeasures against retaliatory tariffs from Canada and Mexico, while the US Secretary of Commerce sent conflicting signals by suggesting fentanyl control in exchange for tariff relief.

The policy volatility heightened market risk aversion sentiment. Domestically, the Two Sessions set a 2024 economic growth target of 5 per cent and outlined plans to advance the "Three Major Projects," aiming to support real estate demand through urban village redevelopment and easing purchase restrictions. Fundamentals side, cost support showed signs of stabilisation. Coupled with the seasonal demand boost from the "golden March and silver April," the operating rate of downstream processing enterprises increased by 4-5 percentage points W-o-W.

Attention should focus on the sustained realisation of March end-use consumption demand. Inventory-wise, as of Monday, domestic aluminium ingot and aluminium billet inventory saw an inventory buildup of only 6,500 tonnes, indicating a slowdown in the buildup pace. The inventory turning point is approaching, and supply-side pressure is expected to gradually ease.

SMM analysis pointed out that driven by macro sentiment and trading expectations, SHFE aluminium remains more likely to rise than fall. However, concerns over intensified overseas trade frictions warrant close attention to policy expectations from the Two Sessions. In the short term, aluminium prices are expected to fluctuate upward at high levels.

Today, the most-traded alumina 2505 contract opened at RMB 3,313 per tonne, with a high of RMB 3,326 per tonne and a low of RMB 3,266 per tonne, closing at RMB 3,282 per tonne, down 0.94 per cent. Trading volume was 75,000 lots, and open interest was 185,000 lots.

SMM Comments: Recently, domestic spot alumina prices have stabilised, mainly due to increased demand for alumina exports and transfer to delivery warehouse, which supported alumina prices. In the short term, spot alumina prices in some regions saw a slight rebound.

However, overseas alumina prices declined, effectively closing the export window. Alumina transfer to delivery warehouse cannot provide sustained demand, and the market expects some new alumina capacity to gradually come online, leading to a strong expectation of a supply and demand imbalance for alumina. In the medium and long-term, spot alumina prices remain under pressure.

In the short term, spot alumina prices may enter a phase of fluctuating adjustments. Continuous attention should be paid to the profitability of alumina exports and changes in bauxite prices.

Note: This article has been issued by SMM and has been published by AL Circle in its original form without any modifications or edits to the information.