The US stock market plunge, coupled with AI concerns, triggers a sharp decline, and aluminium prices are under pressure in the doldrums

Futures: SHFE aluminium closed at RMB 23,395 per tonne in the night session, down 0.91 per cent, breaking below the short-term moving averages MA5 (23,544) and MA10 (23,522), with the moving average system showing a bearish alignment; the price is approaching the medium-term lifeline MA60 (23,069.42), which will become a key defensive level. The MACD indicator's DIF (-23.3329) accelerated its decline after crossing below the zero line, while DEA (117.8205) also pulled back, and the histogram's negative value expanded to -282.3068, indicating significantly strengthened bearish m-o-mentum. The core trading range for SHFE aluminium is suggested at 23,200-23,600.

LME aluminium closed at USD 3,097.5per tonne in the night session, down 0.63 per cent, with the price fluctuating between MA5 (3,111.9) and MA10 (3,093.55); after the short-term moving averages converged, there are signs of turning downward. It remains below MA30 (3,133.22) and above MA60 (3,008.32), indicating a stable medium-term structure but a weakening short-term trend. The MACD indicator's DIF (9.0460) and DEA (21.5155) maintained a death cross, with the histogram's negative value at -24.9391, suggesting continued accumulation of bearish m-o-mentum. The core trading range for LME aluminium is suggested at 3,080-3,120.

Macro Front:Trump's tariff policy faces significant uncertainty. The US House of Representatives passed a resolution opposing President Trump's tariff hike on Canada. The resolution has been submitted to the Senate and is expected to pass. (Bullish ★) The US Treasury Secretary stated that his team met with Chinese officials in Beijing last week to prepare for upcoming high-level talks with the Vice Premier. Ministry of Commerce spokesperson He Yadong responded that China-US economic and trade teams maintain close communication at various levels through the economic and trade consultation mechanism. (Bullish ★) US stocks fell sharply as investors worried that artificial intelligence could erode future profits of some companies, triggering a broad decline in risk assets. (Bearish ★)

Fundamentals: Supply side, domestically, domestic and Indonesian aluminium projects are steadily ramping up production, but affected by fewer natural days in February, overall February production dropped m-o-m from January. Domestically, with the Chinese New Year approaching, downstream demand for raw materials marginally weakened. Coupled with the impact of high aluminium prices suppressing demand, downstream demand marginally weakened, and enterprises' willingness for casting ingot significantly strengthened, leading to a lower proportion of liquid aluminium in February. Although warehouse withdrawals of aluminium ingot in major consumption areas increased year-over-year this week, the social inventory buildup trend continued, with Thursday's inventory up 35,000 tonnes from Monday, and inventory pressure gradually increasing; the post-Chinese New Year holiday social inventory peak is expected to hit a new high in nearly three years.

Primary aluminium market: In the early session, SHFE aluminium 2602 fluctuated upward, with the price center higher than the previous trading day. Affected by the approaching Chinese New Year, overall market sentiment was weak, with mainstream transactions concentrated at the average price to a premium of RMB 10 per tonne. Yesterday, the shipment sentiment index in the east China market was 2.21, down 0.08 m-o-m; the purchasing sentiment index was 2.33, up 0.04 m-o-m. SMM A00 aluminium closed at RMB 23,350 per tonne, up RMB 90 per tonne from the previous trading day, at a discount of RMB 160 per tonne against the 2602 contract, up RMB 30 per tonne from the previous trading day; at a discount of RMB 220 per tonne against the 2603 contract. The central China market maintained sluggish transactions yesterday.

As the Chinese New Year approached, pre-holiday stockpiling by downstream processing enterprises had basically ended, with only minimal just-in-time procurement. Major suppliers also gradually entered the Chinese New Year holiday, resulting in limited circulating supply. However, some traders engaged in buying the dip and stockpiling, driving transaction prices higher. Ultimately, actual transaction prices in the central China market ranged from a premium of RMB 20  to a premium of RMB 60 against the central China price. Yesterday, the shipment sentiment index in the central China market was 2.43, down 0.14 m-o-m; the purchasing sentiment index was 2.09, down 0.05 m-o-m. SMM central China closed at RMB 23,260 per tonne, up RMB 100 per tonne from the previous trading day, at a discount of RMB 250 per tonne against the 2602 contract, up RMB 40 per tonne from the previous trading day; at a discount of RMB 310 per tonne against the 2603 contract. The Henan-Shanghai price spread was -RMB 90 per tonne, narrowing by RMB 10 per tonne from the previous trading day.

Secondary aluminium raw materials: Yesterday, spot primary aluminium prices edged down slightly compared to the previous trading day, with SMM A00 spot closing at RMB 23,350 per tonne, while aluminium scrap prices overall held steady. Yesterday, baled UBC was quoted in a range of RMB 16,850-17,300 per tonne (tax excluded), and shredded aluminium tensile scrap (priced based on aluminium content) was quoted in a range of RMB 19,000-19,700 per tonne (tax excluded). In terms of the price difference between primary aluminium and scrap, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was RMB 3,543 per tonne on February 12, while the price difference between A00 aluminium and shredded aluminium tensile scrap was RMB 2,736 per tonne. High aluminium prices suppressed downstream demand, leading to low stockpiling willingness among downstream aluminium processing enterprises, with stockpiling volumes significantly lower than in previous years.

Additionally, the Chinese New Year holiday period was longer compared to 2025. This week, both aluminium scrap yards and scrap utilisation enterprises gradually entered the Chinese New Year holiday, with yard shipment activities suspended. Only a small number of delayed arrivals were slightly warehoused, and market trading tended to be sluggish. Post-Chinese New Year, aluminium scrap prices are expected to hover at highs, as downstream demand is unlikely to recover quickly. The mainstream range for shredded aluminium tensile scrap (priced based on aluminium content) is still expected to fluctuate around RMB 19,000-19,800 per tonne (tax excluded). Aluminium scrap yards and some scrap utilisation enterprises have not yet ended their holidays, constraining the recycling of new scrap. Supply release remains tight, coupled with high aluminium prices, providing bottom support for aluminium scrap prices. However, downstream demand declined m-o-m compared to January, and transactions are expected to remain sluggish, primarily consisting of just-in-time restocking. In the short term, the supply-demand standoff with both sides is likely to persist. Close attention should be paid to the pace of work resumption at downstream processing enterprises after the holiday, and caution is warranted as post-holiday resumption expectations may reignite market capital sentiment, thereby pushing up aluminium prices and keeping trading activity in the aluminium scrap market sluggish.

Secondary aluminium alloy: Futures side, the most-traded aluminium alloy 2604 contract opened at RMB 22,195 per tonne, quickly dipped to around RMB 22,085 per tonne after opening, then fluctuated and rebounded, hitting an intraday high of RMB 22,295 per tonne before noon. In the afternoon, it consolidated narrowly in the range of RMB 22,200–22,280 per tonne, and finally closed at RMB 22,260 per tonne, up 55 per tonne or 0.25 per cent from the previous close.

Trading volume was 9,009 lots, and open interest fell by 1,588 lots to 12,761 lots, mainly due to short covering. Spot market side, the A00 aluminium price rose RMB 90 per tonne from the previous trading day to RMB 23,350 per tonne, while the SMM ADC12 price held steady at RMB 23,650 per tonne. Currently, upstream and downstream enterprises have gradually entered the Chinese New Year holiday period. Most small and medium-sized secondary aluminium plants have shut down furnaces for the holiday, and large enterprises have also begun arranging holidays starting today. Market shipments have basically halted. Against the backdrop of synchronised cooling on both supply and demand sides, spot quotations and actual transactions have noticeably weakened, and the market as a whole has entered a pre-holiday lull. Prices are expected to remain stable with limited fluctuation room before the holiday.

Aluminium market summary: The US House of Representatives opposed Trump's tariff hike on Canada, and high-level economic and trade contacts between China and the US signalled eased relations, leading to a temporary cooling of trade friction risks, which boosted market sentiment. However, overnight declines in gold and silver prices, combined with a sharp drop in US stocks fueled by AI concerns, put pressure on risk assets, partially offsetting the macro-positive impact on aluminium prices. Seasonal weakening pressure on fundamentals became more pronounced. On the supply side, new aluminium projects domestically and overseas steadily ramped up production. On the demand side, as the Chinese New Year holiday approached, downstream processing enterprises successively halted production for the holiday, compounded by the dampening effect of high aluminium prices, leading to a significant weakening in raw material procurement demand. Enterprises' willingness to cast ingots increased substantially, the proportion of liquid aluminium declined accordingly, and the pace of inventory buildup expanded m-o-m.

The market widely expects post-holiday inventory peaks to hit a three-year high, with visible inventory increasingly weighing on aluminium prices. Overall, bullish sentiment in the nonferrous metals market cooled, and coupled with high inventory pressure, aluminium prices were in the doldrums this week. During the Chinese New Year holiday, domestic markets are closed while overseas markets continue trading. Caution is warranted against volatility in macro and overseas markets during the holiday, potentially causing post-holiday fluctuations in aluminium prices.

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.