Futures: In the night session on March 25, the most-traded SHFE aluminium 2605 contract opened at RMB 23,890 per tonne, hit a high of RMB 23,900 per tonne and a low of RMB 23,745 per tonne, and finally closed at RMB 23,820 per tonne, down 0.17 per cent. Open interest in the night session stood at 269,000 lots, an increase of 1,711 lots from the daytime session. 

Prices rose with open interest increasing, indicating that funds were replenishing long positions at low levels and showing some recognition of the rebound. RSI rebounded from lows to around 50, neutral to slightly strong, without entering overbought territory. LME aluminium opened at USD 3,260 per tonne, hit a high of USD 3,264.5 per tonne and a low of USD 3,219 per tonne, and closed at USD 3,242 per tonne, down 0.11 per cent. Trading volume was 19,906 lots, down 5,391 lots, while open interest was 68.5 lots, up 4,082 lots.

Macro front: In the early hours of the 25th, Tehran time, Iran's permanent mission to the United Nations issued a statement on social media saying that non-hostile vessels may safely pass through the Strait of Hormuz in coordination with the relevant Iranian authorities, provided that the countries to which they belong or with which they are associated do not participate in or support acts of aggression against Iran and fully comply with the announced safety and security regulations. (Neutral) The White House said that US-Iran negotiations were "ongoing and productive," and Trump therefore instructed the US Department of Defence to delay strikes on Iran's power and energy infrastructure. If Iran refuses to accept reality, the US will take tougher action. (Neutral)

Fundamentals: Inventory side, as of Thursday, aluminium ingot inventory in China's major consumption regions increased by 12,000 tonnes from Monday, with the main sources of inventory buildup being Foshan, Chongqing, and Hangzhou, while Gongyi and Tianjin posted slight destocking. Yesterday, aluminium billet inventory in two regions fell slightly to 11,500 tonnes.Primary aluminium Market: In early trading, SHFE aluminium 2604 fluctuated downward, while edging slightly higher than the previous trading day. Overall market buying sentiment was relatively good, and sellers held prices firm as aluminium prices remained at relatively low levels. 

Later in the morning, SHFE aluminium 2604 fluctuated upward, with its centre moving higher than the previous trading day. Some sellers still did not quote prices, while some showed a notably stronger willingness to hold prices firm. Overall market buying sentiment was relatively good. Yesterday, mainstream transaction prices in the market were mostly around the average price of the SHFE aluminium 04 contract to +RMB 10 per tonne. Yesterday, the east China market shipment sentiment index was 2.64, up 0.01 m-o-m; the purchasing sentiment index was 2.42, up 0.02 m-o-m. 

Yesterday, aluminium prices stopped falling and rebounded. Affected by the fear of further declines over the previous two days, buying sentiment among central China traders and downstream processing enterprises improved slightly from the previous day, but overall transactions had not yet returned to a fully active state, and buyers tended to expand discounts when making purchases. The final actual transaction prices in the central China market ranged from RMB 20 per tonne below the central China price to RMB 10 per tonne above it. Yesterday, the shipment sentiment index in the central China market was 2.64, up 0.01 m-o-m; the purchasing sentiment index was 2.42, up 0.02 m-o-m.

Aluminium scrap: Yesterday, spot primary aluminium rose RMB 290 per tonne from the previous trading day, and the aluminium scrap market generally followed higher. To correct aluminium scrap prices that had deviated from actual market transaction levels amid wild swings in aluminium prices, some alloy enterprises in Jiangxi and Anhui made substantial adjustments to prices of tense scrap series such as shredded aluminium tense scrap and ADC12 aluminium shavings, with single-day increases of RMB 500-700 per tonne. Under the current wild swings in aluminium prices, scrap yards showed rising willingness to hold back cargoes, highlighting the resilience of aluminium scrap prices. On the other hand, stricter regulatory oversight under the “reverse invoicing” policy sharply increased tax compliance costs in the aluminium scrap recycling segment. In some regions, as operating procedures have yet to be fully streamlined, the supply of actually compliant, invoice-backed, and tradable cargoes remained tight, and supply-side elasticity was significantly weakened by policy friction. In terms of the price difference between A00 aluminium and aluminium scrap, as of March 25, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was RMB 2,855 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was RMB 1,565 per tonne. The aluminium scrap market is expected to enter a weak consolidation phase this week, with the mainstream range for shredded aluminium tense scrap (priced based on aluminium content) hovering at RMB 20,000-20,600 per tonne (ex-tax). 

Supply side, regulatory policies such as reverse invoicing are unlikely to see substantive easing in the short term, compliance costs in the aluminium scrap recycling segment remain high, and raw material circulation efficiency continues to be suppressed. Demand side, expectations for aluminium prices to remain in the doldrums will weigh on the buying and selling sentiment of traders and downstream scrap utilisation enterprises. In addition, the peak season of “Golden March and Silver April” has fallen short of expectations, the release pace of terminal orders has lagged notably behind the seasonal pattern, and downstream scrap utilisation enterprises have mostly been purchasing as needed, lacking motivation for large-scale restocking. In the short term, close attention is still needed on the impact of geopolitical conflicts on fluctuations in primary aluminium prices, the actual recovery of terminal orders, and the actual implementation progress of supply-side policies, with vigilance against the risk of wild price swings.

Secondary aluminium alloy: In futures, the aluminium alloy 2604 contract opened at RMB 22,885 per tonne in early trading. Intraday trading was active, with a high of RMB 23,015 per tonne and a low of RMB 22,540 per tonne. 

It closed at RMB 22,960 per tonne at midday, up RMB 260 per tonne, or 1.15 per cent, from the previous settlement price. From the intraday trend, prices repeatedly fluctuated around the average price line, with a fierce tug-of-war between longs and shorts, multiple retreats after a rapid rise during the session, and a notable rally late in the morning session. In the spot market, the secondary aluminium alloy market was lifted by the rebound in futures yesterday, and quotations were raised slightly, with mainstream gains of RMB 100 per tonne. Some enterprises raised prices accordingly to recoup earlier losses, and market sentiment recovered slightly from the previous period. However, transactions remained weak, with downstream players mainly purchasing as needed and showing limited acceptance of high prices, constraining upside room for prices. In the short term, ADC12 prices are expected to fluctuate rangebound, and further gains will still require substantive improvement on the demand side. In markets outside China, current overseas ADC12 quotations remained in the range of USD 3,220-3,260 per tonne, with immediate import losses continuing at around RMB 2,000, leaving the theoretical import window closed.

Aluminium market summary: Currently, macro and geopolitical risks in the global aluminium market have not yet faded. The Middle East situation remained stagnant, and threats to navigation through the Strait of Hormuz were unresolved. Aluminium enterprises in the region faced two-way disruptions to raw material imports and product exports, putting the stability of the global aluminium supply chain under pressure, and the risk premium persisted. However, earlier in the week, part of the risk premium retreated as sentiment eased and bulls took profits. 

Affected by stronger-than-expected US employment and inflation data, market expectations for interest rate cuts were pushed back significantly, with the first cut this year likely postponed to late Q3 to Q4. A stronger US dollar, coupled with expectations of tighter liquidity, continued to weigh on the valuation of commodities. Fundamentally, expectations for aluminium production cuts outside China still remained, with Europe, the Middle East, and other regions disturbed by energy and logistics factors, and some capacity entering maintenance cycles, so the logic of global supply contraction remained intact; in China, aluminium operating rates remained stable, supply-side increments were limited, and overall supply held steady. After the holiday, demand in China entered a phase of gradual recovery, the share of direct supply of liquid aluminium increased, and the operating rate of downstream processing enterprises rebounded m-o-m, with the industry gradually returning to a normal production pace. 

Among them, demand from PV, packaging, and power grid sectors was strong, providing core support; construction extrusion recovered slowly as work resumed, the recovery pace in traditional sectors remained mild, and overall support from end-users gradually strengthened. Continued destocking of LME inventory provided bottom support for LME aluminium, but against the backdrop of tighter capital liquidity and profit-taking by bulls, upward momentum was insufficient, and the backwardation structure weakened somewhat. China's social inventory rose to a high for the same period in nearly five years; the inventory buildup cycle had not ended, and high inventory plus weak spot fundamentals jointly suppressed upside momentum. Divergence between domestic and overseas drivers continued, the SHFE/LME price ratio kept weakening, and the market is expected to remain under pressure in the short term.

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.