US employment data falls short of expectations, aluminium ingot continues destocking trend this week

Futures: Last Friday, the SHFE aluminium 2504 contract opened at RMB 20,855 per tonne, with a high of RMB 20,920 per tonne and a low of RMB 20,790 per tonne, closing at RMB 20,880 per tonne, down RMB 5 per tonne or 0.02 per cent from the previous settlement. On the same day, LME aluminium opened at USD 2,699 per tonne, reached a high of USD 2,711 per tonne and a low of USD 2,675.5 per tonne, and closed at USD 2,689 per tonne, down USD 14 per tonne or 0.52 per cent.

Macro: (1) In February, US non-farm payrolls increased by 151,000, slightly below market expectations. The unemployment rate rose to 4.1 per cent, the highest since November 2024, compared to an expected 4 per cent and a previous value of 4 per cent. (Bullish★)

(2) The Office of the Customs Tariff Commission of the State Council announced that the Canadian government will impose a 100 per cent tariff on Chinese EVs starting October 1, 2024, and a 25 per cent tariff on Chinese steel and aluminium products starting October 22, 2024. This unilateral tariff hike disregards objective facts and WTO rules, representing typical trade protectionism, discriminatory measures against China, severely infringing on China's legitimate rights and interests, and damaging Sino-Canadian economic and trade relations. (Bearish★)

Fundamentals: (1) According to the SMM survey, the operating rate of the aluminium processing industry showed a weak recovery last week, up 1 percentage point WoW to 60.8 per cent. Current end-use consumption recovery remains limited, and the operating rate of the aluminum processing industry is expected to continue a mild rebound in March. (Bullish★)

(2) According to the latest data from the General Administration of Customs, in February 2025, China's exports of unwrought aluminium and aluminium semis totalled 408,000 tonnes, down 9.53 per cent M-o-M and 12.70 per cent Y-o-Y. Cumulative exports for 2025 reached 859,000 tonnes, down 11 per cent Y-o-Y. Aluminium semis exports are expected to remain weak MoM in March, with attention needed on changes in overseas aluminium tariffs. (Bearish★)

(3) SHFE announced that effective from the settlement on Tuesday, March 11, 2025, the price limit for alumina futures contracts will be adjusted to 8 per cent, with the margin ratio for hedging trades set at 9 per cent and for speculative trades at 10 per cent. (Neutral)

Primary aluminium market: Last Friday morning, SHFE aluminium front-month contract fluctuated at highs, with varying market activity levels. Traders were active, while downstream buyers were cautious and purchased sparingly.

Specifically, trading activity among traders in east China was slightly more positive than the previous day, while downstream buyers were hesitant due to high prices. Spot discounts remained unchanged from the previous trading day.

Last Friday, SMM A00 aluminium recorded a discount of RMB 50 per tonne against the SHFE aluminium 2503 contract, with SMM A00 aluminium ingot prices at RMB 20,840 per tonne, up RMB 40 per tonne from the previous trading day. In central China, downstream buyers focused on long-term contract pick-ups due to high aluminium prices, prioritising reductions in finished goods and raw material inventories.

Market activity showed no significant improvement, while trading at trade circulation ports was relatively active, with suppliers maintaining high enthusiasm for selling. Transactions were mainly on par with or at a discount of RMB 10 per tonne against central China prices. SMM Central China A00 aluminium recorded RMB 20,720 per tonne, up 40 per tonne from the previous trading day. Current mainstream consumption area inventories continued to decline, but downstream buyers were cautious due to high absolute prices, limiting upward momentum for spot premiums and discounts. Aluminium prices are expected to remain relatively stable with a weak trend next week.

Secondary aluminium raw materials: Last Friday, aluminium scrap market quotes were largely stable. Baled UBC aluminium scrap was quoted at RMB 15,250-15,950 per tonne (tax excluded), while shredded aluminium tense scrap was quoted at RMB 16,350-17,950 per tonne (tax excluded). Currently, demand from scrap utilisation enterprises remains weak, with limited upward momentum for aluminium scrap prices. The price difference between primary metal and scrap slightly widened. In the short term, aluminium scrap prices will continue to fluctuate rangebound, following primary aluminium.

Secondary aluminium alloy: Last Friday, secondary aluminium alloy prices stopped rising and stabilized. Domestic SMM ADC12 prices remained at RMB 21,200-21,400 per tonne. Market orders have only slightly rebounded, with weak demand continuing to limit the upside room for ADC12 prices. In the short term, ADC12 prices are expected to continue fluctuating rangebound. Attention should be paid to changes in raw material market liquidity and the progress of end-use consumption recovery.

Summary: Macro side, US employment data fell short of expectations, strengthening the outlook for multiple interest rate cuts by the US Fed this year, leading to a pullback in the US dollar index. Domestically, the Two Sessions emphasized stabilizing the economy, providing macro support for aluminium prices. Fundamentals side, domestic aluminium production resumption is progressing, with capacity expected to be released by the end of March.

Inventory-wise, aluminium inventories continued to decline this week. According to the SMM survey, aluminium inventories fell by 18,000 tonnes W-o-W to 868,000 tonnes today. Coupled with the "golden March and silver April" peak season, the operating rates of aluminium processing enterprises continued to rise, strengthening aluminium consumption support. Overall, macro factors are mixed, with domestic macro support remaining intact, while overseas trade barriers increase but with high uncertainty.

Fundamentals side, both supply and demand are growing. As the consumption peak season approaches, most sectors see rising order volumes and operating rates, combined with the destocking of aluminium ingot social inventories, providing strong support for aluminium prices. In the short term, aluminium prices are expected to fluctuate upward at highs.

Note: This article has been issued by SMM and has been published by AL Circle in its original form without any modifications or edits to the information.