Sino-US talks last week sent positive signals, coupled with supply disruptions for copper, zinc and other metals, boosting sentiment across the non-ferrous sector. However, solid US employment and economic data together with inflation pressures rule out interest rate cuts within the year and raise domestic rate hike expectations, cooling market sentiment again.
On fundamentals, restricted electrolytic aluminum capacity in the Middle East persists, and LME aluminum inventories have fallen below 350,000 tons to a historic low, tightening spot premiums. Strong exports ease domestic sales pressure, yet domestic social inventories of aluminum ingots and bars remain high at 1.662 million tons. Downstream processing operating rate stayed flat at 64.2%, marking the start of traditional off-season demand, with spot discounts standing at 110-130 yuan per ton.
Overseas supply shortage underpins aluminum prices, while high domestic inventories and sluggish demand cap gains. Shanghai aluminum will mainly fluctuate at high levels in the short term.
Tighter tax policies and tight scrap aluminum supply keep scrap prices firm, providing solid cost support for cast aluminum alloys. Nevertheless, downstream die-casting enterprises stay at low operating rates, with no visible improvement in orders from automotive, communication and other end sectors. Manufacturers only make rigid demand purchases with low restocking willingness, leading to slack market trading.
Supported by costs, cast aluminum alloys have limited downside, yet lack of demand restricts upward momentum. Prices will remain range-bound for now. Focus on downstream operating rate recovery and scrap aluminum supply changes.
