SMM Aluminum Market Morning Comment (Dec 29)

The most-traded SHFE 2402 aluminum contract opened at 19,445 yuan/mt overnight, with its low and high at 19,375 yuan/mt and 19,500 yuan/mt before closing at 19,475 yuan/mt, down 75 yuan/mt or 0.38%. LME aluminum opened at $2,393.5/mt yesterday, with its high and low at $2,394.5/mt and $2,353.5/mt respectively before closing at $2,367/mt, a decrease of $28/mt or 1.17%.

On the macro front, the annual rate of the U.S. core PCE price index in November was lower than expected, and the inflation index cooled down more than expected. In the third quarter, the U.S. real GDP was revised downward, and consumption fell short of expectations, which further strengthened the view that the Federal Reserve will turn to interest rate cut. The U.S. dollar index continued to fall, providing some support for aluminum prices. Domestic macro environment remained positive. After major state-owned banks lowered deposit rates, joint-stock banks have also lowered deposit rates. China's main goals this year are expected to be achieved. In terms of fundamentals, Qinghai Province has implemented power load management due to earthquake relief, which could potentially affect the aluminum supply. Demand tends to weaken. As the traditional off-season has arrived, and companies are beginning to increase their cash flow at the end of the year, the willingness to restock has declined. It is expected that the destocking of aluminum social inventory will slow down, but the inventory will still remain low. SMM predicts that the domestic social inventory of aluminum ingots will remain low in the near future, and the aluminum prices will remain firm in the short term due to upstream influences.