Regional Environmental Protection-Driven Production Restrictions Drag Down Aluminum Downstream Operating Rates; Focus on US Fed Interest Rate Decision Tonight [SMM Aluminum Morning Brief Dec 18]

Overnight, the most-traded SHFE aluminum 2502 contract opened at the highest point of 19,945 yuan/mt, hit a low of 19,875 yuan/mt, and closed at 19,935 yuan/mt, up 10 yuan/mt or 0.05% from the previous day. On Tuesday, LME aluminum opened at the highest point of $2,566/mt, reached a low of $2,526/mt, and closed at $2,537/mt, down $27.5/mt or 1.07%.

Summary: On the macro front, the US dollar index hovered at highs, closing up 0.088%, while metals broadly declined overnight. US PMI data showed a divergence between manufacturing and services sectors, with interest rate cut expectations remaining largely unchanged as investors awaited the US Fed's interest rate decision. Fundamentals side, high aluminum production costs led to production cuts in some capacities; on the demand side, domestic downstream aluminum demand entered a deeper off-season. Additionally, export orders dropped significantly due to the cancellation of export tax rebates, and recent environmental protection inspections in Zhengzhou caused multiple aluminum plate/sheet and strip producers to implement production restrictions as required, with no set timeline for resumption, further weakening downstream operating rates. Overall, the off-season consumption combined with the risk of aluminum ingot inventory buildup has led to pessimistic market sentiment. In the short term, aluminum prices are expected to remain weak and consolidate. Focus on the US Fed's final policy meeting of 2024 and the interest rate decision to be announced later today.