Seasonal Weakness Pressure Dominates Aluminum Prices in the Doldrums [SMM Aluminum Morning Meeting Minutes]

SMM Morning Meeting Minutes, 2.10

Futures:Last night session, SHFE aluminum closed at 23,525 yuan/mt, down 0.06%, fluctuating rangebound near the MA5 (23,544). The short-term moving average system showed a bearish alignment, with prices under pressure below the MA10 (24,035.5) and MA30 (24,006.17), but medium and long-term, it remained above the MA60 (22,972.33), indicating the structure was not fully weak. The MACD indicator's DIF (41.8834) and DEA (230.9414) maintained a death cross, with the histogram deeply negative (-378.1158), suggesting bearish momentum still dominated. The core trading range for SHFE aluminum is suggested at 23,300-23,800. LME aluminum closed at $3,109/mt in the night session, down 0.67%, fluctuating around the MA5 (3,086.8) but still constrained by the MA10 (3,122.2) and MA30 (3,125.65), with significant short-term moving average pressure; medium and long-term, it held above the MA60 (2,999.22). The MACD indicator's DIF (12.4642) and DEA (28.0169) continued in a death cross state, with the histogram negative (-31.1055), indicating the bearish pattern remained unchanged. The core trading range for LME aluminum is suggested at 3,080-3,140.

Macro Front:US National Economic Council Director Hassett stated that US job growth data is expected to show a slowdown, but this does not indicate a weakening economic momentum; rather, it reflects structural changes in the labour market. The January non-farm payroll report is due Wednesday, with the market expecting an increase of about 70,000 jobs. (Neutral) The Ministry of Commerce held a symposium with automakers to study work related to automobile circulation and consumption. In 2026, China will optimize the implementation of the auto trade-in policy, conduct pilot reforms in auto circulation and consumption, improve industry management systems, and take multiple measures to promote the expansion and quality improvement of auto consumption. (Bullish)

Fundamentals:Supply side, the ramp-up of newly commissioned aluminum projects domestically and overseas pushed up the daily average production. Demand side, production-wise, with the Chinese New Year holiday approaching, downstream processing enterprises began holidays successively, leading to a decline in operating rates and weakening demand; the proportion of liquid aluminum dropped 8.6 percentage points WoW. Trading-wise, after the absolute aluminum price fell, traders' bullish sentiment supported increased procurement, spot discounts narrowed, and transactions showed slight recovery. However, the social inventory buildup trend continued, with Monday's inventory up 21,000 mt WoW from last Thursday, inventory pressure gradually increasing, and the post-holiday social inventory peak is expected to hit a new high in nearly three years.

Primary Aluminum Market:In the morning session, SHFE aluminum 2602 fluctuated upward, with the price center higher than the previous trading day. Affected by the rising aluminum price and the approaching holiday, overall market procurement sentiment was weak, prompting sellers to lower prices, with mainstream transactions concentrated at discounts of 10-30 yuan/mt.

On Monday, the shipment sentiment index in the east China market was 2.78, down 0.06 WoW; the buying sentiment index was 2.68, down 0.18 WoW. SMM A00 aluminum closed at 23,400 yuan/mt, up 260 yuan/mt from the previous trading day, at a discount of 170 yuan/mt against the 2602 contract, down 20 yuan/mt from the previous trading day. On Monday, trading in the central China market was mainly sluggish. As the Chinese New Year holiday approached, pre-holiday stockpiling by downstream processing enterprises was basically completed, with only a small amount of just-in-time procurement and some traders buying the dip to stockpile. Suppliers initially showed strong willingness to hold prices firm, but weaker transactions led to continuously lower prices. Eventually, the actual transaction prices in the central China market hovered around a premium of 10 yuan/mt to a discount of 30 yuan/mt against the central China price. On Monday, the shipment sentiment index in the central China market was 2.73, up 0.04 WoW; the buying sentiment index was 2.17, flat WoW. SMM central China price closed at 23,280 yuan/mt, up 250 yuan/mt from the previous trading day, at a discount of 290 yuan/mt against the 2602 contract, down 30 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -120 yuan/mt, widening by 10 yuan/mt from the previous trading day. Secondary Aluminum Raw Materials: On Monday, spot primary aluminum prices rose compared to the previous trading day, with SMM A00 spot aluminum closing at 23,400 yuan/mt. Aluminum scrap prices generally followed the increase on Monday. On Monday, baled UBC was mainly offered at 16,800-17,250 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was mainly offered at 19,000-19,700 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 3,543 yuan/mt on February 9, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,736 yuan/mt. Recently, directly affected by recycling policies and forced to follow the rise in 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, and downstream buying sentiment was significantly dampened, leading to purchasing as needed. Aluminum scrap prices are expected to hover at highs this week, with shredded aluminum tense scrap (priced based on aluminum content) mainly fluctuating in the range of 19,000-19,800 yuan/mt (ex-tax). Before the holiday, repeated environmental protection-related controls in Anhui, Henan, Hebei, and other regions, combined with high aluminum prices, provided bottom support for aluminum scrap prices. Suppressed demand forced scrap utilization enterprises and aluminum scrap yards to enter the holiday early, making it difficult to change the pattern of "nominal prices without actual transactions." The overall tug-of-war between sellers and buyers continues. It is necessary to closely track the production halts and resumptions of downstream processing enterprises and the progress of environmental protection enforcement in various regions, and be alert to the continued sluggish trading atmosphere in the aluminum scrap market if aluminum prices pull back again.

Secondary Aluminum Alloy: Futures side, the most-traded 2604 secondary aluminum alloy futures contract showed a pattern of retreating after a rapid rise during the day. It opened slightly higher in the early session and fluctuated upward, hitting a high of 22,330 yuan/mt, but faced significant pressure at highs, followed by a price pullback. In the afternoon, influenced by increased bearish positions, it dipped to the 22,160 yuan/mt level, consolidated at lows toward the close, and finally settled at 22,165 yuan/mt, recording a slight intraday decline, with market sentiment turning cautious. In the spot market, the price of A00 aluminum rose by 260 yuan/mt from the previous trading day to 23,400 yuan/mt, while the SMM ADC12 price increased by 100 yuan/mt to 23,650 yuan/mt. Entering the final trading week before the Chinese New Year, as upstream and downstream enterprises in the secondary aluminum industry gradually began holidays, market transactions noticeably slowed, and enterprise quotations were mostly adjusted in line with market conditions. On the production side, most secondary aluminum enterprises suspended operations between February 5 and 13, with resumption times concentrated around the eighth day of the first lunar month or the Lantern Festival. The average shutdown period is expected to last 8–20 days, about 2 days longer YoY. Overall, downstream demand continues to contract, and fundamental support for prices is marginally weakening. Before the holiday, the secondary aluminum alloy price is expected to fluctuate at highs in the doldrums, with the price center pulling back slightly.

Aluminum Market Summary:On the macro front, the domestic Ministry of Commerce is promoting the expansion and quality improvement of automotive consumption, particularly by clarifying optimization of the trade-in policy, providing medium and long-term demand expectations to support the aluminum price floor. However, fundamentals are facing typical seasonal weakening pressures. On the supply side, newly commissioned aluminum projects domestically and overseas continue to ramp up production, with daily average production maintaining an upward trend, sustaining supply pressure. On the demand side, the market has entered the pre-Chinese New Year off-season, as downstream processing enterprises gradually begin holidays, leading to a decline in operating rates and noticeably weaker consumption from the production side. The current aluminum ingot inventory buildup has accelerated, and the market expects post-holiday inventory peaks to reach multi-year highs. Visible inventory pressure is gradually becoming a key real factor suppressing aluminum prices. In summary, under the influence of earlier macro headwinds, substantial capital took profits and exited, leading to a pullback in aluminum prices and a reduction in open interest. However, as precious metals did not show further downward momentum, aluminum prices stabilized accordingly. In the short term, aluminum prices are expected to consolidate.

[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make decisions cautiously and not use this to replace independent judgment. Any decisions made by clients are unrelated to SMM.]