During the night session, SHFE aluminum fluctuated and pulled back to close lower. In the short term, aluminum prices are expected to maintain a consolidation pattern. [SMM Aluminum Morning Meeting Minutes]

2.5 SMM Morning Meeting Minutes

Futures:On the night session of February 4, the most-traded SHFE aluminum 2603 contract opened at 23,800 yuan/mt, rose after opening, hit a high of 23,900 yuan/mt, then pulled back, touched a low of 23,625 yuan/mt, and fluctuated in consolidation toward the close, eventually closed at 23,690 yuan/mt, down 1.11% from the previous close. The short-term technical picture showed a "rebound from lows + momentum repair," but resistance from moving averages and insufficient volume constrained the rebound's height. A breakout above 24,000 yuan/mt is needed for the rebound to continue; otherwise, prices may fluctuate at lows again. In terms of open interest, night session open interest was about 217,000 lots, down 7,603 lots from the daytime session. The slight decrease in open interest indicated some bulls took profits during the rebound, and funds did not enter on a large scale, so the rebound's sustainability needs verification. LME aluminum opened at $3,108.5/mt, hit a high of $3,134/mt, a low of $3,050/mt, and finally closed at $3,059/mt, down 1.29%. Trading volume was 25,000 lots, down 81.84 million lots, and open interest was 702,000 lots, up 2,182 lots.

Macro Front:Iranian Foreign Minister Araghchi clarified Iran's official stance on talks with the US in Oman, stating negotiations will take place around 10:00 AM on the 6th in Muscat, the capital of Oman. (Neutral) US Treasury Secretary Besant said, "We always support a strong dollar policy" and will not relax financial regulations "at all costs." (Bearish ★) On the evening of February 4, President Xi Jinping spoke with US President Trump by phone. Trump said the US is willing to strengthen cooperation with China to promote new developments in bilateral relations, values China's concerns on the Taiwan issue, and is willing to maintain communication with China to keep US-China relations good and stable during his term. (Neutral)

Fundamentals: Inventory side, today's social inventory of aluminum ingots in the region increased by 19,000 mt WoW from Monday, with the main sources of inventory buildup being Wuxi and Gongyi. In the short term, high aluminum prices may continue to suppress end-use demand, coupled with the impact of the Chinese New Year break on downstream sectors. Some aluminum processing enterprises for extrusions, cables, etc., plan to extend the Chinese New Year break this year. Aluminum ingots still face inventory buildup risks, and spot premiums/discounts are expected to remain under pressure.

Primary Aluminum Market:In the morning session, SHFE aluminum 2602 fluctuated upward, with the price center higher than the previous trading day. Due to the slow rise after aluminum prices hit limit down, overall bullish sentiment among downstream players rose somewhat. Buying sentiment increased somewhat this Wednesday, with mainstream market transactions concentrated at parity to a premium of 30 yuan/mt. This Wednesday, the selling sentiment index in the east China market was 2.85, up 0.12 WoW; the purchasing sentiment index was 2.54, up 0.20 WoW. SMM A00 aluminum closed at 23,760 yuan/mt, up 470 yuan/mt from the previous trading day, at a discount of 210 yuan/mt against the 2602 contract, up 10 yuan/mt from the previous trading day. On Wednesday, pre-holiday stockpiling by downstream processing enterprises in the central China market neared its end, and weakening end-use consumption reduced purchase willingness among processors. The rebound in aluminum prices also dampened traders' demand for restocking on dips. Overall buying sentiment weakened in the central China market, while some suppliers increased their willingness to sell due to year-end payment collection needs. Ultimately, actual transaction prices in the central China market ranged from parity to a premium of 30 yuan/mt against the central China price. The selling sentiment index in the central China market on Wednesday was 2.78, up 0.03 WoW; the buying sentiment index was 2.28, down 0.02 WoW. SMM central China price closed at 23,640 yuan/mt, up 480 yuan/mt from the previous trading day, at a discount of 330 yuan/mt against the 2602 contract, up 20 yuan/mt from the previous trading day. The Henan-Shanghai price spread was -120 yuan/mt, narrowing by 10 yuan/mt from the previous trading day.

Secondary Aluminum Raw Materials:On Wednesday, spot primary aluminum prices stopped falling and rebounded compared to the previous trading day, with SMM A00 spot aluminum closing at 23,760 yuan/mt. Aluminum scrap prices actively followed the rise on Wednesday. Baled UBC was mainly offered at 16,900-17,300 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was mainly offered at 19,100-19,800 yuan/mt (ex-tax). Regarding the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,775 yuan/mt on February 4, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,861 yuan/mt. Aluminum scrap prices in Shanghai, Jiangsu, Shandong, Jiangxi, and other regions closely followed aluminum price adjustments, with pullbacks ranging from 200-500 yuan/mt. Recently, directly affected by recycling policies and forced to follow rising aluminum prices at highs, the market has shown a situation of "nominal prices without actual transactions." Scrap utilization enterprises in related provinces were forced to reduce or halt production, downstream purchasing sentiment was significantly dampened, and procurement was conducted as needed. Aluminum scrap prices are expected to hover at highs this week, with shredded aluminum tense scrap (priced based on aluminum content) mainly ranging from 19,100-20,000 yuan/mt (ex-tax). Against the backdrop of persistently high primary aluminum prices, coupled with recycling policies restricting aluminum scrap market liquidity, more bottom support will be provided for aluminum scrap prices. However, repeated production restrictions in central China and persistently low downstream operating rates make it difficult to change the "nominal prices without actual transactions" pattern. Stocking demand is hard to release, and the overall tug-of-war between sellers and buyers intensifies. Before the Chinese New Year, close tracking of primary aluminum trends, the progress of lifting environmental protection warnings in central China, and pre-holiday production halts and holidays is necessary. Be cautious of aluminum prices retreating after a rapid rise leading to aluminum scrap pullbacks; market trading atmosphere will remain sluggish.

Secondary Aluminum Alloy:On the futures side, the aluminum alloy 2603 contract opened at 22,310 yuan/mt, fluctuated around the 22,400 yuan/mt level, and surged again towards the close, finally settling at the day's high of 22,595 yuan/mt, up 380 yuan/mt or 1.71% from the previous close, mainly driven by bears reducing positions. On the spot market, the price of A00 aluminum rebounded sharply by 470 yuan/mt from the previous trading day to 23,760 yuan/mt, while the SMM ADC12 price increased by 150 yuan/mt to 23,800 yuan/mt. Futures showed a noticeable rebound, but secondary aluminum alloy plants’ quotations diverged: some enterprises raised their offers by 200 yuan/mt following the market trend, largely recovering the previous day’s decline; others, constrained by weak orders, kept quotations steady for the time being and adopted a wait-and-see approach. As aluminum prices rebounded, market purchasing sentiment improved slightly compared with earlier, but downstream buyers continued to make just-in-time procurement as the main approach. Supply side, approaching the Chinese New Year holiday, some secondary aluminum alloy plants arranged early holiday closures due to reduced orders and environmental protection-related controls, with suspensions expected to begin on the 5th and continue successively; overall holiday duration was longer than the same period in previous years. Overall, downstream demand continued to shrink, and fundamental support for prices weakened marginally. In the short term, secondary aluminum alloy prices are expected to hover at highs. On the import front, overseas ADC12 quotations held steady on Wednesday at $2,840–2,900/mt, while domestic spot prices were raised by 200 yuan/mt to 22,900 yuan/mt, resulting in an immediate import profit of around 300 yuan/mt.

Aluminum Market Summary:Macro front, domestic macro conditions were generally positive; U.S.-Iran negotiations were scheduled to take place in Oman, easing Middle East geopolitical risks. Demand side, affected by falling aluminum prices, purchasing sentiment edged up slightly, but constrained by the approaching Chinese New Year holiday, overall downstream purchasing sentiment remained at a relatively low level. Coupled with continued inventory buildup across the industry and a declining proportion of liquid aluminum conversion, structural supply-demand imbalance in the industry had not been effectively alleviated. Overall, short-term volatility risks in SHFE aluminum and nonferrous metals markets increased significantly. Future prices may still be affected by factors such as a shift in US Fed policy, and further amplification of fluctuations cannot be ruled out.

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