Futures: In the night session on March 19, the SHFE aluminium 2605 contract opened at RMB 23,100 per tonne, hit an intraday high of RMB 24,020 per tonne and a low of RMB 23,100 per tonne, and finally closed at RMB 23,930 per tonne, down RMB 250 per tonne from the previous close, a decline of 1.03 per cent. 

Technical analysis showed that the MA lines indicated short-term weakness and a medium-term bullish pattern. SMA5 (24,332.82) < SMA10 (24,630.78), with both lines turning downward, suggesting that short-term bullish m-o-mentum had weakened significantly and the downtrend was clear; medium and long-term moving averages SMA20 (24,753.45) > SMA40 (24,627.32) > SMA60 (24,462.93), with the medium and long-term moving averages still diverging upward, indicated that the medium-term bullish structure had not been fully damaged, but support had weakened substantially. On the 4-hour candlestick chart, the MACD green bars continued to expand (DIFF: -16.72, DEA: 143.6, STICK: -320.64). 

The DIFF line crossed below the DEA line to form a death cross, indicating that bearish momentum had strengthened significantly and short-term correction pressure had intensified. In terms of open interest, night-session open interest was about 285,000 lots, down 7,320 lots from the previous session. On March 19, LME aluminium opened at USD 3,426.0 per tonne, with a high of USD 3,432.0 per tonne, a low of USD 3,115.0 per tonne, and a close of USD 3,242.0 per tonne, down 5.19 per cent from the previous day. Trading volume was 65,028 lots, an increase of 29,465 lots, and open interest was 689,000 lots, an increase of 12,905 lots.

Macro front: On Wednesday, both the US Fed and the Bank of Canada decided to keep interest rates unchanged; on Thursday, the Bank of Japan, the Bank of England, the European Central Bank, as well as the central banks of Switzerland and Sweden, made the same decision. These central banks clearly stated that they would remain vigilant, concerned that rising energy prices could trigger a wave of inflation across the broader economy. (Bearish ★) According to CME FedWatch, the probability of a 25-bp rate hike by the US Fed in April was 7.2 per cent, while the probability of keeping rates unchanged was 92.8 per cent. By June, the probability of cumulative 25-bp hikes by the US Fed was 9.2 per cent, the probability of cumulative 50-bp hikes was 0.2 per cent, and the probability of keeping rates unchanged was 90.6 per cent. (Bearish ★)

Fundamentals: This week, the weekly operating rate of leading downstream aluminium processing enterprises in China edged up 1 percentage point w-o-w to 62.9 per cent, with peak-season conditions emerging slightly and demand seeing some release. On inventory, as of Thursday this week, aluminium ingot inventory in major consumption areas in China stood at 1.339 million mt, with an inventory buildup of 45,000 mt from last Thursday. Aluminium casting ingot output in March was expected to remain high. In the short term, the inventory buildup trend in China’s aluminium ingot social inventory was expected to continue, with the post-holiday peak still likely to reach 1.35-1.4 million mt.

Primary aluminium market: SHFE aluminium 2603 fluctuated downward in early trading, with the price centre falling sharply from the previous trading day. Affected by the decline in aluminium prices, overall purchasing sentiment rose yesterday. Sellers held prices firm, and yesterday’s mainstream quotations and transaction prices were concentrated around the average price to +RMB 10 per tonne. Yesterday, the East China market shipment sentiment index was 3.24, up 0.08 m-o-m; the purchasing sentiment index was 3.16, up 0.13 m-o-m. Yesterday, SHFE aluminium futures prices extended their decline, and buying sentiment in the central China market was strong. 

Traders and downstream processing enterprises were both bullish, tending to purchase at low prices and moderately stockpile. In addition, suppliers showed a strong willingness to hold prices firm, and transaction premiums showed no weakening trend. Ultimately, quotations in the central China market were concentrated at premiums of RMB 10-40 per tonne over the central China price, while actual transaction prices were mainly concentrated at premiums of RMB 20-30 per tonne over the central China price. Yesterday, the shipment sentiment index in the central China market was 2.59, flat m-o-m; the purchasing sentiment index was 2.43, up 0.01 m-o-m.

Aluminium scrap: Yesterday, spot primary aluminium edged down RMB 20 per tonne from the previous trading day, while the aluminium scrap market held steady, with some regions recouping the declines of the previous two days. In terms of the price difference between A00 aluminium and aluminium scrap, on March 18, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was RMB 3,528 per tonne, and the price difference between A00 aluminium and shredded aluminium tensile scrap was RMB 2,506 per tonne. Supply side, tighter regulatory oversight under the “reverse invoicing” policy sharply increased tax compliance costs in the aluminium scrap recycling segment.

 In some regions, because operating procedures have not yet been fully streamlined, the supply of actually compliant and invoiced circulating cargo remained tight, and supply-side elasticity was significantly weakened by policy friction. Demand side, although the market is in the traditional peak consumption season of “Golden March and Silver April,” aluminium prices are fluctuating at highs, severely squeezing downstream profit margins. Order acceptance among scrap utilisation enterprises fell to a freezing point, willingness for large-scale restocking was absent, and most maintained just-in-time procurement, with signs of underperforming in peak season emerging. The aluminium scrap market is expected to remain in the doldrums at highs next week, with the mainstream range for shredded aluminium tensile scrap (priced based on aluminium content) running around RMB 20,200-20,800 per tonne (excluding tax). The US-Iran geopolitical conflict remains the main bullish factor for primary aluminium, but inventory at high levels of aluminium ingot in China constrains upside room for aluminium prices, dragging the overall aluminium scrap market into the doldrums at highs. On the supply side, regulatory policies such as reverse invoicing are unlikely to see any substantive easing in the short term, compliance costs in the aluminium scrap recycling segment remain elevated, and raw material circulation efficiency continues to be suppressed. On the demand side, expectations of weak aluminium price performance will slightly weigh on the purchasing sentiment of traders and downstream scrap utilisation enterprises. In addition, the “Golden March and Silver April” peak season has fallen short of expectations, the release pace of terminal orders has lagged significantly behind the seasonal pattern, and downstream scrap utilisation enterprises mostly purchase as needed, lacking momentum for large-scale restocking. In the short term, close attention is still needed on the impact of geopolitical conflicts on primary aluminium price fluctuations, the actual recovery of end-user orders, and the actual implementation progress of supply-side policies, with vigilance against the risk of wild swings in prices at elevated levels.

Secondary aluminium alloy: Futures, the 2604 aluminium alloy contract in yesterday's daytime session opened higher and then moved in a one-way decline overall. It opened at RMB 23,530 per tonne in early trading, fluctuated briefly, then started to plunge before noon. The decline widened further in the afternoon, with a low of RMB 22,910 per tonne. It rebounded slightly late in the session and finally closed at RMB 23,000, down RMB 570  from the previous settlement price, or 2.42 per cent. Technically, the daily candlestick formed a large bearish candlestick, breaking below the short-term moving average support. The RSI pulled back below the neutral range, indicating a short-term weak pattern, and market sentiment was bearish. In the spot market, before noon, affected by the narrowing fluctuation in aluminium prices, enterprises showed limited willingness to adjust prices, and quotations were broadly stable. Demand remained weak, with downstream procurement mainly for restocking rigid demand. Trading performance was mediocre, and wait-and-see sentiment was strong. In the afternoon, as futures plunged, market quotations followed lower by RMB 100-200 per tonne. In the short term, under the dual pressure of weak aluminium prices and sluggish demand, ADC12 prices are expected to remain in a narrow and weak range-bound pattern, though downside room is relatively limited due to cost support.

Aluminium market summary: At present, macro geopolitical risks in the global aluminium market have yet to subside. The Middle East situation remained in a stalemate, threats to navigation through the Strait of Hormuz remained unresolved, and aluminium enterprises in the region faced two-way disruptions to both raw material imports and product exports. The stability of the global aluminium supply chain was under pressure, and the risk premium persisted, though the earlier risk premium within the week partially retreated amid easing sentiment and profit-taking by bulls. Affected by stronger-than-expected US employment and inflation data, market expectations for interest rate cuts were pushed back significantly, with the first rate cut this year likely delayed until late Q3 to Q4. A stronger US dollar, coupled with tighter liquidity expectations, continued to weigh on bulk commodity valuations. Fundamentally, expectations for aluminium production cuts outside China still remained. 

In Europe, the Middle East, and elsewhere, some capacity entered maintenance cycles amid disruptions from energy and logistics factors, and the logic of global supply contraction remained intact. In China, aluminium operating remained stable, supply-side increment was limited, and the overall market stayed steady. After the holiday, China's demand entered a gradual recovery channel, the proportion 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 its normal production pace. Among them, demand from PV, packaging, and power grid remained strong, forming the core support. Construction extrusion slowly recovered with the progress of work resumption, while the recovery pace in traditional sectors was relatively mild, and overall end-user support gradually strengthened. Continued destocking in LME inventory provided bottom support for LME aluminium, but amid tightening fund liquidity and profit-taking by bulls, upside momentum was insufficient, and the backwardation structure weakened somewhat. 

China's social inventory rose to a near five-year high for the same period, and the inventory buildup cycle has not yet ended. High inventory and weak fundamentals jointly suppressed upward momentum. Divergence between domestic and overseas drivers continued, and the SHFE/LME price ratio kept weakening, with prices likely 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.