Domestic Macro Continues to Signal Easing; Weakening Demand at Home and Abroad [SMM Aluminum Morning Meeting Summary Dec 16]  

Last Friday night, the most-traded SHFE aluminum 2502 contract opened at 20,395 yuan/mt, reaching a high of 20,465 yuan/mt and a low of 20,325 yuan/mt, before closing at 20,345 yuan/mt, down 5 yuan/mt or 0.02% from the previous close. Last Friday, LME aluminum opened at $2,602/mt, hit a high of $2,618/mt and a low of $2,586/mt, and closed at $2,615/mt, up $11/mt or 0.42%.

Summary: On the macro front, the US dollar fell 0.07% overnight but rose 0.92% on a weekly basis as investors digested the possibility of slower interest rate cuts by the US Fed next year. According to CME's FedWatch tool, the market fully expects the US Fed to cut interest rates at the upcoming meeting, but the probability of another cut in January is only about 24%, with March being the most likely timing for the next cut. Domestically, positive signals continue to emerge. At the China Economic Annual Conference on December 14, the central bank stated that it would moderately increase monetary policy support, implement RRR cuts and interest rate cuts at appropriate times, and moderately strengthen the supportive stance of next year's monetary policy based on this year's supportive measures.

On the fundamentals side, high aluminum production costs have led to partial capacity reductions on the supply side. On the demand side, domestic downstream aluminum demand has entered the off-season, and aluminum semis exports in December may see a significant decline due to earlier export rush. Both domestic and overseas demand are weakening. In terms of inventory, the off-season and increased arrivals in north-west China have heightened the risk of inventory buildup. In the short term, aluminum prices are expected to fluctuate, with attention on macroeconomic developments and aluminum cost trends.