Domestic and international aluminium prices weakened in tandem, and weak macro dragged down the pre-holiday market

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SMM April 30: Macro perspective: Internationally, on April 26, Iranian Islamic Parliament Vice Speaker Nikzad stated that Iran's Supreme Leader Mojtaba Khamenei had issued a clear order that the Strait of Hormuz must not return to its pre-war status. The US Fed maintained interest rates unchanged as expected, but four dissenting votes emerged this time, constituting the most divided policy meeting since 1992.

Meanwhile, the Fed's statement saw significant wording adjustments, explicitly noting for the first time that "the Middle East situation is fueling heightened uncertainty in the economic outlook." Powell sent hawkish signals at the press conference, stating that "oil-related inflation impacts still lie ahead," and noting that the impact of energy price shocks on real economic growth "typically takes 3 to 4 months to show up in some consumer spending data." Money markets subsequently almost abandoned bets on interest rate cuts this year and began pricing in the possibility of rate hikes in 2027.

Domestically, the Political Bureau of the CPC Central Committee held a meeting on April 28 to analyse and study the current economic situation and economic work. The meeting noted the need to strengthen planning and construction of water networks, new-type power grids, computing power networks, next-generation communication networks, urban underground pipe networks, and logistics networks.

The meeting emphasised deepening the rectification of "involution-style" competition and fully implementing the "AI+" initiative. The meeting also noted efforts to stabilise the real estate market and stabilize and strengthen capital market confidence.

Fundamentals:

Supply side, as the traditional peak consumption season continued, downstream sectors such as plate/sheet, strip and foil, and aluminium wire and cable provided effective demand support. China's proportion of liquid aluminium edged up, with the monthly liquid aluminium proportion rising 1.7 percentage points M-o-M to 75.3 per cent.

Overall performance was slightly below early-month expectations, with the core drag coming from weaker-than-expected aluminium extrusion orders. Based on SMM's liquid aluminium proportion calculation data, China's aluminium casting ingot volume in April declined 3.4 per cent Y-o-Y and 9.0 per cent M-o-M.

Demand side, China's aluminium processing composite PMI registered 53.9 per cent in April. While still running above the 50 mark, it pulled back notably from the March high. Overall industry prosperity weakened at the margin, shifting from broad-based recovery to structural divergence. New energy and packaging demand still had support, while real estate, automotive, and some export chains recovered below expectations, and high aluminium prices also suppressed procurement and order release. Overall, the "Silver April" effect continued but momentum weakened, with industry operations trending toward a rational return.

Inventory, on Thursday China's mainstream consumption regions had an aluminium ingot inventory of 1.432 million tonnes, destocking 33,000 tonnes W-o-W from Monday and destocking 33,000 tonnes W-o-W from Thursday of the previous week.

Summary:

Affected by the ongoing Middle East geopolitical conflicts, navigation through the Strait of Hormuz remained restricted, regional aluminium capacity saw production cuts, and the global aluminium supply deficit intensified, highlighting the ex-China aluminium supply-demand gap. LME aluminium premiums recovered and rose, while inventory continued to pull back to low levels, providing solid bottom support for LME aluminium.

In contrast, in China, downstream processing enterprises showed weak recovery in operating rates, persistently high aluminium prices suppressed end-user purchase willingness, and social inventory stayed high. Overall, ex-China geopolitical risks persisted, and the supply landscape tightened, with LME having fundamental resilience. However, a stronger US dollar and cooling interest rate cut expectations, weighing on the commodity sentiment. LME aluminium saw profit-taking at high levels, while SHFE aluminium followed lower, dragged by high inventory and weak demand. The divergence between LME and SHFE continued to converge.

The most-traded SHFE aluminium contract is expected to trade in the range of RMB 23,800-24,900 per tonne next week, with LME aluminium in the range of USD 3,380-3,560 per tonne.

Note: This article has been issued by SMM and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.