Analysis of aluminum price trend in the domestic spot market in March

Macro: In the last week of the end of the month, aluminum prices continued their weak trend and frequently hit new lows
.
On the one hand, the concerns caused by the Sino-US trade friction have a direct impact
on prices.
In the early morning of March 23, Beijing time, US President Trump signed a memorandum announcing that he would take measures to impose tariffs on Chinese products, restrict Chinese investment, and resort to the WTO dispute settlement mechanism for related issues, which fired the first shot
of the trade war with China.
At 7 a.
m.
that day, China immediately gave the first step of countermeasures, and China's Ministry of Commerce released a list of products that terminated concessions for US imports of steel and aluminum products under the 232 measures and solicited public comments
.
The Sino-US trade war has once again increased the uncertainty of global economic growth, market risk appetite has declined, and the price of base metals as a risky asset has fallen
.
On the other hand, the dollar index also rebounded sharply, weighing on metal prices, the growth rate of the US economy may reach 3% this year, which makes the Fed's pace of interest rate hikes this year more aggressive, after the news was announced, the dollar index extended its rally, aluminum prices lack support upward weakness, falling
.

Market: Market trading resumed in March, but due to continued low prices and concerns about the Sino-US trade war, the willingness to stock up in the downstream peak season was not high, and more on-demand purchases were maintained, and traders' enthusiasm to enter the market was limited, and the overall transaction was far less than the same period last year
。 East China: The market originally hoped that the aluminum price would rise in the peak season in March, but under the influence of the Fed's interest rate hike and the outbreak of the Sino-US trade war, the aluminum price trend in March was not satisfactory, and the center of gravity continued to move down, Yangtze River spot aluminum once fell to around 13500, the market lacked favorable stimulation, aluminum price rebound was weak, as of the end of the month, Yangtze River spot aluminum between 13620-13660 yuan / ton, down 390 yuan / ton
from the end of February 。 South China: As of the end of the month, the price of aluminum ingots in South China was between 13910-14010 yuan / ton, down 430 yuan / ton from the end of February, a decline slightly greater than that in East China, and the local market demand was acceptable, but due to the purchase of aluminum rods by some merchants to replace aluminum ingots, the demand for aluminum ingots weakened to a certain extent, but the overall transaction was significantly better than last month
.

In terms of inventory: in the last week of this month, the inventory trend of London aluminum maintained a decline in the early stage, and the inventory rose sharply on Thursday, with the latest inventory reported 1,286,300 metric tons, and a total of 9,925 metric tons of inventory increased this week, an increase of about 0.
78%; In the last week of this month, the total stock of aluminum on the Shanghai Futures Exchange was 970387 tons, an increase of 30,069 tons, or about 3.
2%,
from last week.
China's aluminum ingot inventory has been rising
steadily since the end of 2016.
From the perspective of the inventory in the previous period, as of March 23, 2018, the inventory of aluminum ingots reached 940,000 tons, a record high
.
In contrast, LME aluminum ingot inventories, which began to decline year by year since 2014, fell to about 1 million tons at the end of last year, and have increased slightly this year and are now around
1.
2 million tons.
But overall, overseas aluminum ingot stocks are in a relatively low position overall, which is not the same as the conventional inventory of more than 4 million tons a few years ago
.
With the recovery of the global economy, the overall demand for aluminum ingots in overseas countries will increase year by year, but if the trade war starts, China's aluminum exports that account for half of the world's aluminum ingot production will be partially restricted
.
If domestic aluminum ingot inventories continue to rise, and foreign aluminum ingot inventories have been at a low level, then the pattern of strong aluminum prices outside and weak inside will continue
.

Future market forecast: Overall, the biggest macro factor in March is the trade war, in the context of Sino-US trade frictions, the high domestic aluminum ingot inventory, low foreign inventory will continue the pattern of aluminum price external strength and internal weakness
.
With the arrival of the traditional consumption season in the first half of the year, spot purchases are expected to recover, and aluminum prices are expected to rebound
slightly in April.
From a medium and long-term perspective, electrolytic aluminum production capacity is still overcapacity, and the new resumption of production is still continuing, after the heating season, the supply of raw materials will be gradually released, the cost center of electrolytic aluminum or again downward, when the electrolytic aluminum release process will continue to accelerate, and the pressure of destocking is greater
.
Focus on whether the trade war shows signs of widening and when the inflection point for spot inventories will arrive
.