Guoxin Futures: Escalation of Middle East Conflict May Impact Aluminum Chain, Electrolytic Aluminum Builds Positions and Rises

Shanghai Aluminum opened with a sharp rally, then continued a relatively strong upward trend, with the increase gradually exceeding 3%. The main contract added more than 19,000 lots. In terms of spot market, according to SMM data, on March 2nd, the average spot price of A00 aluminum ingots was 23,620 yuan/ton, up 210 yuan/ton from the previous day. Demand in East China, Central China, and South China markets has not fully recovered, mainly buying on dips. In the short term, aluminum producers face the risk of production halts due to military strikes in Israel. In the medium to long term, if the Strait of Hormuz remains closed, transportation of raw materials and finished products will be hindered, leading to insufficient raw material supply. Aluminum finished products cannot be supplied effectively, and ongoing tensions and further deterioration will increase transportation and energy costs, forcing aluminum plants to cut production. Domestically, according to SMM data, as of March 2nd, aluminum ingot inventories stood at 1.229 million tons, up 72,000 tons from last Friday. Aluminum rod inventories were about 403,500 tons, roughly 5,000 tons higher than last Friday, continuing to accumulate and reaching near three-year high levels for the same period. Further escalation of geopolitical conflicts will amplify aluminum price volatility. Coupled with favorable macro policies and seasonal demand expectations, under the “bullish outlook,” aluminum prices may break free from the fundamental “weak reality” suppression ahead of time. It is expected that Shanghai Aluminum will maintain a volatile but upward trend, with the potential to challenge the previous high of 26,000 yuan/ton. Caution is advised for short-term pullbacks; hold long positions and be cautious about chasing highs. (Guoxin Futures)