Recently, Shanghai aluminum has reached a new high during trading. May I ask if there have been any changes in the fundamentals?
Yuefeng Aluminum At present, the upward driving force in the spot market is not very strong. On the one hand, the aluminum price has rebounded, and the impact of environmental protection production restrictions in the Central Plains region still exists. The downstream purchasing sentiment remains at a low level. Meanwhile, the overall consumption atmosphere in the downstream is weakening, and the downstream operating rate has been continuously declining. On the other hand, the price keeps hitting new highs, the profits of aluminum plants are rising, the operating rate of electrolytic aluminum is high, and social inventories are accumulating. Last Thursday, the inventory of electrolytic aluminum ingots in major domestic consumption areas was recorded at 714,000 tons, an increase of 30,000 tons from last Monday. This marks the sixth consecutive week of inventory accumulation. The overall domestic social inventory shows signs of accumulation. As the Spring Festival approaches, this trend is likely to continue. Despite the weak short-term fundamentals, the macro sentiment is favorable. The US dollar remains weak, and metals such as gold, silver, and copper have all reached record highs. The copper-aluminum ratio is also at a historical high. Under the long-term narrative, low inventories and supply constraints provide relatively strong support for aluminum.
2. How do you view the performance of aluminum prices in the future?
Yuefeng Aluminum: First of all, we still remain optimistic about the future market of aluminum. Although in the short term it is in the traditional off-season for consumption, the overall consumption atmosphere in the downstream sector is weakening, and inventories are gradually accumulating. However, in the long term, the macro situation remains relatively positive. The uncertainty of tariffs between China and the United States has decreased, the Federal Reserve continues its interest rate cut process, and domestic demand remains relatively stable during the 15th Five-Year Plan period. The macro narrative remains upward. However, the electrolytic aluminum industry itself remains in a tight balance between supply and demand. Under the concern of AI data centers over power consumption, the subsequent release of new production capacity from overseas aluminum plants may fall short of expectations. Domestic supply is restricted, and the supply increment has entered a stage of low growth. On the demand side, the completion of real estate projects may stabilize, and the continued increase brought by automotive power can offset the decline in demand caused by real estate and construction. The various demands such as energy storage, AI robots, and data centers are accumulating into a tower. The new and old demands are taking turns, and the supply and demand are resonating. In the long term, the fundamentals of aluminum remain relatively healthy, and we still remain optimistic.
