US lifts 50% tariffs on Canadian steel and aluminium, overnight aluminium futures rebound

Futures Market: Overnight, the most-traded SHFE aluminium 2504 contract opened at RMB 20,880 per tonne, hitting a high of RMB 20,910 per tonne and a low of RMB 20,810 per tonne, before closing at RMB 20,830 per tonne, up RMB 75 per tonne or 0.36 per cent. On Tuesday, LME aluminium opened at USD 2,685 per tonne, reached a high of USD 2,711 per tonne and a low of USD 2,669 per tonne, and closed at USD 2,704 per tonne, up USD 17.5 per tonne or 0.65 per cent.

Macro Perspective: (1) The Party Committee of the China Securities Regulatory Commission held an expanded meeting to thoroughly study the important speeches of President Xi Jinping during the Two Sessions and the spirit of the Two Sessions, and to plan specific measures for implementing the capital market's development. The meeting emphasised fully consolidating the momentum of market recovery and improvement. (Bullish★)

(2) US White House Trade Advisor Navarro stated on Tuesday afternoon that President Trump would not raise tariffs on Canadian steel and aluminium imports to 50 per cent on Wednesday. This statement followed Trump's announcement of plans to double the 25 per cent tariff on Canadian metals, in response to Ontario's 25 per cent surcharge on US electricity (a decision that was cancelled after Trump's threat). Ontario's surcharge was a countermeasure to Trump's 25 per cent tariff on Canadian goods. Additionally, Navarro mentioned that the 25 per cent tariff on all imported steel and aluminium would take effect at midnight on the 12th, with no exemptions. (Bearish★)

(3) US January JOLTs job openings rose to 7.74 million, exceeding the expected 7.63 million. Subsequently, traders increased their bets on a US Fed interest rate cut. (Bullish★)

Fundamentals: (1) According to SMM statistics, as of March 11, aluminium ingot inventories were 267,900 tonnes in Guangdong, 321,200 tonnes in Wuxi, and 137,000 tonnes in Gongyi, totalling 726,100 tonnes, an increase of 800 tonnes from the previous trading day. (Bearish★)

(2) On March 11, LME aluminium inventory stood at 502,150 tonnes, down 4,050 tonnes or 0.80 per cent from the previous day. (Bullish★)

(3) According to CAAM data, in February, automobile production and sales reached 2.103 million units and 2.129 million units, respectively. From January to February, China's automobile production and sales totalled 4.553 million units and 4.552 million units, up 16.2 per cent and 13.1 per cent Y-o-Y, respectively. During January-February, the new round of trade-in policy expansion and early implementation, along with enterprise technological upgrades and product renewals, stimulated demand, leading to steady growth in automobile production and sales. The strong start in the automotive industry laid a solid foundation for achieving a Q1 "good start." (Bullish★)

Primary aluminium market: On Tuesday morning, the front-month SHFE aluminium contract saw its centre quickly shift downward, with active spot trading and buying the dip. Suppliers slightly stood firm on quotes. Specifically, in East China, trading among traders was active, and spot discounts narrowed by RMB 10 per tonne compared to the previous trading day. On Tuesday, SMM A00 aluminium ingot recorded a discount of RMB 40 per tonne against the SHFE aluminium 2503 contract, with SMM A00 aluminium ingot priced at RMB 20,710 per tonne, down RMB 60 per tonne from the previous trading day.

In central China, trading activity among traders improved slightly, but downstream actual demand showed no significant improvement. SMM learned that aluminium processing plants in the surrounding areas had high inventories, and safety-related production restrictions further prompted downstream players to prioritise inventory digestion.

On Tuesday, transactions in central China were mostly at a premium of RMB 10 per tonne against SMM central China prices, with SMM central China A00 aluminium ingot priced at RMB 20,600 per tonne, down RMB 40 per tonne from the previous trading day. The price spread between Henan and Shanghai remained at -110 yuan/mt. In the short term, spot premiums and discounts may fluctuate rangebound.

Secondary aluminium raw materials: On Tuesday, aluminium scrap market quotes generally followed aluminium prices, pulling back slightly. Downstream alloy plants maintained purchasing as needed due to lacklustre demand. Baled UBC aluminium scrap was quoted at RMB 15,300-16,050 per tonne (tax excluded), while shredded aluminium tense scrap was quoted at RMB 16,450-17,950 per tonne (tax excluded). In the short term, domestic new scrap supply showed some improvement, but downstream demand remained weak, and with primary and aluminium scrap prices fluctuating at highs, downstream and end-use demand stayed subdued. Aluminium scrap prices may fluctuate rangebound along with primary aluminium.

Secondary aluminium alloy: On Tuesday, secondary aluminium prices remained stable overall. Domestic SMM ADC12 prices held steady at RMB 21,200-21,400 per tonne, while overseas ADC12 prices remained firm at a high of around USD 2,500 per tonne. Instant import losses stayed at RMB 200-300 per tonne, keeping the import window closed. As raw material market liquidity improves, cost-side support is weakening. If the recovery in end-use consumption lacks sustainability, combined with further loosening of cost support, ADC12 prices may face continued downward pressure.

Summary: Macro perspective, US tariff policies on major trading partners have caused significant market volatility and heightened concerns over economic growth. The US dollar index hit its lowest level since mid-October last year. The market will focus on the US Consumer Price Index on Wednesday and the Producer Price Index on Thursday, with traders currently expecting the US Fed to cut interest rates in June.

Fundamentals side, domestic aluminium production resumption continues to advance. Weekly aluminium ingot social inventory remains on a destocking trend, making the destocking turning point increasingly clear. Coupled with the sustained recovery in aluminium processing enterprises' operating rates during the peak season, consumption-side support is strengthening. Overall, the macro perspective shows a tug-of-war between longs and shorts.

Domestic pro-growth policies maintain a positive tone, while overseas trade barriers heighten market risk aversion. Fundamentals indicate a dual increase in supply and demand, with order recovery in multiple sectors driving downstream operating rates higher, supported by continued destocking of social inventories, which provides support for aluminium prices. In the short term, aluminium prices are expected to hover at highs, with key resistance at RMB 21,000 per tonne. Focus on the evolution of tariff policies, US inflation data, and the pace of end-use consumption recovery.

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.