Macro Front Sees New Positive Signals While Fundamentals Remain Bearish [SMM Aluminum Morning Meeting Summary]

》Click to View the SMM Aluminum Industry Chain Database

》Subscribe to Access SMM Historical Spot Metal Prices

SMM Aluminum Morning Briefing on January 16 

Futures Market: The most-traded SHFE aluminum 2503 contract opened at 20,200 yuan/mt overnight, hitting a high of 20,280 yuan/mt and a low of 20,180 yuan/mt, and closed at 20,265 yuan/mt, up 80 yuan/mt or 0.40%. LME aluminum opened at $2,575/mt overnight, with a high of $2,607/mt and a low of $2,553/mt, closing at $2,604/mt, up $30.5/mt or 1.19%. 

Macro: (1) The US overall CPI YoY growth rate mildly rebounded to 2.9%, while core CPI YoY growth rate unexpectedly pulled back to 3.2% from 3.3% in the previous month. Following the data release, traders increased their bets on a US Fed interest rate cut in June, with the likelihood of two rate cuts this year rising (bullish★★); (2) The US recently introduced intensive trade restrictions targeting China. The Ministry of Commerce stated that sanctions, containment, and suppression cannot hinder China's progress (bearish★).

Fundamentals: (1) In 2024, China's automobile production and sales hit new record highs, totaling 31.282 million and 31.436 million units, respectively, up 3.7% and 4.5% YoY (bullish★); (2) According to foreign media, the Canadian government recently announced that it would "pause" its zero-emission vehicle subsidy program once available funds are exhausted, canceling the federal subsidy of up to CAD 5,000 for eligible EVs and plug-in hybrid vehicles (bearish★).

Primary Aluminum Market: On Wednesday morning, SHFE aluminum front-month contract fluctuated downward, pressured by weakening alumina cost support and the downstream entering the holiday period, leading to weaker market transactions and expanded spot discounts. Specifically, trading in east China weakened, mainly due to downstream enterprises gradually entering the holiday period and earlier low-price stockpiling. After aluminum prices broke above 20,000 yuan/mt, purchasing willingness declined, and suppliers focused on selling to SMM-10. On Wednesday, SMM A00 aluminum ingot recorded a discount of 90 yuan/mt against the SHFE aluminum 2501 contract, down 20 yuan/mt from the previous trading day. SMM A00 aluminum ingot was quoted at 20,020 yuan/mt, down 140 yuan/mt from the previous trading day. In central China, downstream demand continued to weaken. After aluminum prices declined, suppliers' willingness to sell decreased, and spot discounts narrowed only slightly.

Secondary Aluminum Raw Materials: On Wednesday, primary aluminum spot prices fell by 140 yuan/mt from the previous trading day, with SMM A00 spot aluminum closing at 20,020 yuan/mt. Aluminum scrap market prices mainly declined, but prices for baled UBC in some regions rose again by 50 yuan/mt compared to Tuesday due to tight supply. Suppliers' willingness to sell weakened, as most small and medium-sized enterprises entered the holiday period, while large enterprises focused on stable long-term contract supply. Overall, downstream pre-holiday stockpiling enthusiasm was low. On Wednesday, baled UBC aluminum scrap was quoted at 14,850-15,600 yuan/mt (excluding tax), and shredded aluminum tense scrap was quoted at 16,250-17,750 yuan/mt (liquid aluminum, excluding tax). As the Chinese New Year holiday approaches, traders showed reluctance to sell, with some small plants gradually entering the holiday period, tightening market supply. Overall transactions were moderate. In the short term, the price difference between primary metal and scrap is expected to fluctuate rangebound.

Secondary Aluminum Alloy: On Wednesday, aluminum prices ended a four-day rally, with SMM A00 aluminum prices falling by 140 yuan/mt from the previous trading day to 20,020 yuan/mt, while secondary aluminum prices remained firm. Domestically, large secondary aluminum enterprises maintained quotes at 20,800-21,000 yuan/mt, while small and medium-sized enterprises kept quotes steady at 20,500-20,700 yuan/mt. For imports, overseas prices for imported ADC12 slightly ranged between $2,440-2,470/mt, with immediate losses for imported ADC12 remaining around 500 yuan/mt. On Wednesday, aluminum prices began to pull back, while secondary aluminum prices remained firm, with limited willingness among enterprises to adjust prices. As the Chinese New Year approaches, upstream aluminum scrap traders gradually entered the holiday period, tightening market supply. Secondary aluminum plants faced challenges in pre-holiday raw material stocking, with costs providing some support to prices. On the demand side, due to pre-holiday market fluctuations, downstream stockpiling sentiment was weak, with die-casting plants only stocking minimally. As both upstream and downstream gradually enter the holiday period, secondary aluminum alloy prices are expected to fluctuate within a narrow range before the holiday. 

Summary: Overnight customs data boosted expectations for US Fed interest rate cuts, coupled with continuous efforts by the Chinese government to stimulate consumption, lifting aluminum prices. Fundamentals side, aluminum capacity remained stable, while spot alumina prices continued to decline due to stable supply, leading to weaker cost support for the aluminum industry. Demand side, as the Chinese New Year approaches, market demand weakened, aluminum processing industry operating rates declined, and some aluminum processing plants neared holiday closures. Although pre-holiday concentrated stockpiling led to better-than-expected inventory destocking, providing short-term support to aluminum prices, the sustainability is expected to be limited. In the short term, attention should remain on the impact of falling spot alumina prices on aluminum costs, as well as downstream holiday schedules and the continuation of pre-holiday stockpiling pace.

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