SMM Morning Meeting Minutes: Futures: In the night session on March 5, the most-traded SHFE aluminium 2604 contract opened at RMB 24,640 per tonne, hit an intraday high of RMB 24,830 per tonne and a low of RMB 24,280 per tonne, and finally closed at RMB 24,435 per tonne, down RMB 380 per tonne from the previous close, a decline of 1.53 per cent. From a technical perspective, the 5/10/20-day moving averages were in a bullish alignment, with MA5 (24,483) > MA10 (24,083) > MA20 (23,893). In terms of open interest, night-session open interest was 237,000 lots, down 14,889 lots from the daytime session.

LME aluminium opened at USD 3,320 per tonne, reached a high of USD 3,400.5 per tonne and a low of USD 3,269 per tonne, and closed at USD 3,292.5 per tonne, down 1.29 per cent. Trading volume was 52,923 lots, down 5,356 lots, while open interest was 669,000 lots, up 1,523 lots.

Macro front: 2026 Government Work Report: economic growth of 4.5 per cent–5 per cent, with efforts in actual work to strive for better results; surveyed urban unemployment rate of around 5.5 per cent, with more than 12 million new urban jobs; an increase in the consumer price index of around 2 per cent, etc. (Bullish ★) Amir Heydari, deputy commander of Iran’s Khatam al-Anbiya Central Headquarters, said in an interview on the morning of the 5th local time that Iran had not actually closed the Strait of Hormuz. In a statement, the Islamic Revolutionary Guard Corps said that military and commercial vessels belonging to the US, Israel, and European countries and their supporters were strictly prohibited from transiting the waters and would be struck if discovered. (Neutral)

Fundamentals: This week, the weekly operating rate of leading domestic downstream aluminium processing enterprises rebounded 2.5 percentage points M-o-M to 59.5 per cent. Overall, post-holiday resumption progressed steadily, but amid high aluminium prices and uneven demand recovery, performance diverged significantly across segments.

SMM expects that, in the short term, industry operating rates will gradually recover alongside downstream restarts, but the dampening effect of high aluminium prices on consumption should not be underestimated. Overall, the market showed a differentiated recovery and a fluctuating upward trend. Going forward, close attention should be paid to the pace of end-user restarts, inventory drawdowns, and order releases.

Primary aluminium market: In early trading, SHFE aluminium 2602 fluctuated upward, with the price centre higher than the previous trading day. Affected by the US-Iran conflict, aluminium prices continued to rise. Yesterday, impacted by high aluminium prices, buying sentiment weakened while selling sentiment strengthened. The spot-futures price spread was currently relatively favourable, and some traders were still making purchases for hedging.

Bullish sentiment was strong, and sellers held prices firm. Yesterday, mainstream transactions were at an average price of RMB 10 per tonne. Yesterday, the East China market shipments sentiment index was 2.98, up 0.3 M-o-M; the buying sentiment index was 2.96, down 0.23 M-o-M. Geopolitical conflicts affected shipments from Aluminum Bahrain, intensifying sentiment around financial constraints. Traders in the central China market remained bullish. Although downstream processing enterprises were constrained by weaker-than-expected orders and inventories not yet fully depleted, resulting in relatively weak purchasing sentiment, traders’ purchases boosted overall market trading, and premiums remained relatively firm. Ultimately, actual transaction prices in the central China market ranged from a premium of RMB 10 per tonne over the central China price to a discount of RMB 30 per tonne to the central China price, with mainstream transaction prices concentrated at a discount of RMB 10-20 per tonne to the central China price. Yesterday, the central China market shipment sentiment index was 2.77, up 0.07 M-o-M; the purchasing sentiment index was 2.4, up 0.08 M-o-M.

Aluminium scrap: The US-Iran conflict continued to disrupt aluminium fundamentals, triggering urgent risk-off sentiment. Yesterday, spot primary aluminium rose RMB 730 per tonne M-o-M from the previous trading day, and the aluminium scrap market actively followed the increase. In terms of the price difference between A00 aluminium and aluminium scrap, on March 5, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was RMB 3,688 per tonne, and the price difference between A00 aluminium and shredded aluminium tensile scrap was RMB 2,881 per tonne.

After the Lantern Festival, domestic aluminium scrap yards and downstream scrap utilisation enterprises had basically fully resumed a normal production pace, but end-use demand recovered slowly, and actual raw material restocking fell short of expectations. It is expected that next week the aluminium scrap market will hold up well at elevated levels, with the mainstream range for shredded aluminium tensile scrap (priced based on aluminium content) running around RMB 20,300-20,900 per tonne (tax excluded).

After the holiday, production order has gradually recovered, and the release of supply has further eased, but downstream processing enterprises’ order recovery has been slow. Overall, trading is expected to remain sluggish, and the supply-demand tug-of-war is set to intensify in the short term. Close attention should be paid to the impact of the US-Iran conflict on primary aluminium supply and transportation, downstream production resumptions, and changes in recycling policies, and vigilance is needed against intensifying price volatility risks.

Secondary aluminium alloy: Futures: Yesterday, the most-traded 2604 aluminium alloy contract opened higher in the morning session and fluctuated upward, touching an intraday high of RMB 23,975 per tonne before noon; it then retreated after rapid rise in the afternoon, with a rapid plunge late in the session to a low of RMB 23,290 per tonne, and finally closed at RMB 23,420 per tonne down 1.06 per cent on the day.

Trading volume increased, while open interest changed slightly. Futures showed a rise-then-fall pattern, with a clear late-session withdrawal of funds and intensified short-term volatility. Yesterday, the secondary aluminium alloy market extended its gains, with producers generally raising quotes by RMB 300-600 per tonne, and SMM ADC12 prices rising to the 24,700-RMB 24,900 per tonne range.

Cost support was significant. Affected by elevated raw material prices and losses on earlier low-priced orders, enterprises’ willingness to raise prices strengthened markedly; even with limited downstream acceptance, they still proactively increased prices in line with the market. Currently, high prices are clearly suppressing downstream purchasing, with replenishment mainly limited to small lots for rigid demand, and overall trading is relatively sluggish.

In the short term, ADC12 prices are expected to maintain a hold-up-well pattern: on the one hand, tensions in the Middle East have put aluminium capacity in Qatar, Bahrain, Mozambique, and other locations at risk of shutdowns, with overseas supply disruptions reinforcing bullish sentiment; on the other hand, domestic resume production has been slow, supply release has fallen short of expectations, and together with strong cost support, downside room for prices is limited. Subsequent market attention will shift to the actual realisation of end-use demand: if downstream orders are released significantly and primary aluminium prices remain strong, the price centre of ADC12 is expected to move further higher; if the demand recovery is insufficient, the market will most likely enter a rangebound consolidation phase.

Aluminium market summary: From a macro perspective, domestic conditions were improving; overseas, geopolitical conflicts in the Middle East escalated, risk-off sentiment strengthened, the US dollar index rose, and there remains considerable uncertainty around the US Fed’s interest rate cut plans.

However, as the direction of the Middle East situation is still unclear, uncertainty around the production and transportation of aluminium-related products increased. From a fundamentals perspective, on the supply side, newly commissioned aluminium projects in China, Indonesia, and Angola continued ramping up, but with the escalation of Middle East geopolitical conflicts, production or shipments at some aluminium smelters have already been affected, and daily average production is expected to decline. On the demand side, after the holiday, as downstream players gradually resumed operations, demand recovered; the downstream weekly operating rate rose a further 2.5 percentage points, and the weekly proportion of liquid aluminium rebounded by about 8 percentage points M-o-M.

On inventories, demand is still in the recovery stage; casting ingot output in March is expected to remain high, and with some volumes not yet warehoused as well as some finished product inventories at aluminium smelters not yet shipped to social warehouses, the inventory buildup trend in China’s social inventory of aluminium ingot is set to continue in the short term, with the post-holiday peak still expected to reach 1.35-1.4 million tonnes.

Overall, although domestic social inventory continues to build, the Middle East geopolitical situation is currently a global focus; if the conflict persists, expectations for global aluminium supply tightness will be strong, and aluminium prices have solid upward momentum. In the short term, aluminium prices are expected to hold up well.

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.

Image source: The image used in this article is generated with an AI tool and does not depict any real-time moment