US February CPI data below expectations, Overnight aluminium prices rise

Futures Market: Overnight, the most-traded SHFE aluminium 2505 contract opened at RMB 21,060 per tonne, hitting a high of RMB 21,100 per tonne and a low of RMB 20,945 per tonne, and closed at RMB 20,970 per tonne, up RMB 5 per tonne or 0.02 per cent. On Wednesday, LME aluminium opened at USD 2,704 per tonne, reached a high of USD 2,726 per tonne and a low of USD 2,692.5 per tonne, and closed at USD 2,700 per tonne, down USD 4 per tonne or 0.15 per cent.

Macro: (1) The US February CPI rose 2.8 per cent Y-o-Y (forecast: 2.9 per cent, previous: 3 per cent) and increased 0.2 per cent M-o-M (forecast: 0.3 per cent, previous: 0.5 per cent). February CPI data fell short of expectations across the board, prompting traders to raise bets on US Fed interest rate cuts, with at least two cuts expected this year. (Bullish ★)

(2) On March 12 local time, Canada's Finance Minister announced that starting March 13, Canada will impose a 25 per cent retaliatory tariff on USD 29.8 billion worth of US goods. This tariff policy covers USD 12.6 billion in steel products, $3 billion in aluminium products, and USD 14.2 billion in other US goods. (Bullish ★)

Fundamentals: (1) According to SMM statistics, as of March 13, domestic aluminium ingot inventory in major consumption areas stood at 862,000 tonnes, down 6,000 tonnes from Monday. (Bullish ★)

(2) On March 12 (Wednesday), data released by Marubeni Corp showed that aluminium inventory at Japan's three major ports fell to 313,400 tonnes by the end of February 2025, down approximately 3.5 per cent from the previous month. (Bullish ★)

Primary aluminium market: On Wednesday morning, SHFE aluminium showed a clear upward trend, with the centre of the front-month contract shifting higher. Spot market sentiment was bullish, and suppliers stood firm on quotes. Specifically, trading activity was active among traders in east China, but the rapid rise in aluminium prices made it difficult to narrow spot discounts. Yesterday, SMM A00 aluminium was at a discount of RMB 40 per tonne against the SHFE 2503 contract, with SMM A00 aluminium ingot recorded at RMB 20,900 per tonne, up RMB 190 per tonne from the previous trading day.

In central China, transactions were moderate yesterday. Although downstream safety-related production restrictions ended, enterprises still held inventory. Considering high aluminium prices, enterprises mainly focused on digesting inventory. Yesterday, transactions in central China were mostly on par with SMM central China prices, with SMM central China A00 aluminium at RMB 20,780 per tonne against the SHFE 2503 contract, up RMB 180 per tonne from the previous trading day, and the Henan-east China price spread was -120 yuan/mt. In the short term, inventory destocking in major consumption areas and improved downstream demand expectations will support aluminium prices. Coupled with downstream purchasing as needed, spot premiums and discounts may fluctuate rangebound.

Secondary aluminium raw materials: Yesterday, primary aluminium spot prices rose by RMB 190 per tonne from the previous trading day, with SMM A00 spot aluminium closing at RMB 20,900 per tonne. Aluminium scrap market quotes generally followed the rise in aluminium prices, but downstream alloy plants showed limited demand improvement and maintained purchasing as needed, leading to limited follow-up increases in aluminium scrap prices. Yesterday, baled UBC aluminium scrap was quoted at RMB 15,300-16,100 per tonne (tax excluded), and shredded aluminium tense scrap was quoted at RMB 16,450-17,950 per tonne (tax excluded).

In the short term, domestic new scrap supply has improved, but due to generally weak downstream demand and high prices of primary and aluminium scrap, downstream and end-use demand remain sluggish, and aluminium scrap prices may fluctuate rangebound along with primary aluminium.

Secondary aluminium alloy: Yesterday, aluminium prices rebounded significantly, but the secondary aluminium market lacked momentum to follow. Domestic SMM ADC12 prices remained unchanged from the previous day at RMB 21,200-21,400 per tonne. Current market demand is weaker than expected, with slow order recovery suppressing the upside room for ADC12 prices. As raw material market liquidity improves, cost-side support is weakening. If the recovery in end-use consumption lacks sustainability, combined with further easing of cost support, ADC12 prices may face continued pressure for upward adjustments or even downward pressure.

Summary: On the macro side, US February inflation data fell short of expectations, alleviating some market concerns and raising expectations for a US Fed interest rate cut in June. Fundamentals side, domestic aluminium production resumption continues; aluminium ingot social inventory remains in destocking mode during the week, coupled with a sustained recovery in aluminium processing enterprise operations, strengthening support from the consumption side.

Overall, recent macro sentiment is bullish, and fundamentals show a supply-demand increase trend. Order recovery across multiple sectors is driving downstream operations higher, with social inventory destocking providing support for aluminium prices. In the short term, aluminium prices are expected to hover at highs.

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.