Six Departments Issue Long-Term Capital Market Entry Plan, US Dollar Hovers at Key Level, SHFE Aluminum Continues to Weaken [SMM Aluminum Morning Meeting Summary]

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1.23 SMM Aluminum Morning Meeting Notes

Futures Market: The most-traded SHFE aluminum 2503 contract opened at 20,280 yuan/mt overnight, hitting a high of 20,300 yuan/mt and a low of 20,215 yuan/mt, before closing at 20,245 yuan/mt, down 70 yuan/mt or 0.34%. On Wednesday, LME aluminum opened at $2,659.5/mt, reached a high of $2,653/mt and a low of $2,609/mt, and closed at $2,632.5/mt, down $19/mt or 0.72%.

Macro: (1) US President Trump called on Russian President Putin to stop the Russia-Ukraine conflict, stating that tariffs and sanctions would be imposed on Russia if no agreement is reached (bearish★); (2) Trump announced plans to impose tariffs on Chinese goods, to which the Ministry of Foreign Affairs responded: willing to maintain communication and properly manage differences (bullish★); (3) The China Securities Regulatory Commission announced that six departments jointly issued the "Implementation Plan for Promoting Medium and Long-Term Funds to Enter the Market" (bullish★).

Fundamentals: (1) Inventory Dynamics: According to SMM statistics, as of January 22, aluminum ingot inventories stood at 125,400 mt in Guangdong, 145,200 mt in Wuxi, and 52,400 mt in Gongyi, with a total increase of 4,600 mt compared to the previous trading day. For domestic aluminum billet inventories, Guangdong recorded 86,300 mt, and Wuxi recorded 45,900 mt, with a total increase of 4,100 mt (bearish★); (2) According to customs data, China's aluminum extrusion exports in December 2024 (HS codes 76041010, 76041090, 76042100, 76042910, 76042990) totaled 74,100 mt, down 40.04% MoM and 16.58% YoY, mainly due to the Ministry of Finance's announcement on November 15 to cancel aluminum export tax rebates starting December 1, leading to a rush to export in November that overdrew subsequent export volumes (bearish★).

Primary Aluminum Market: On Wednesday morning, the SHFE front-month aluminum contract fluctuated downward. Fundamentals in Wuxi showed good outflows from warehouses, stimulating suppliers' sentiment to stand firm on quotes. As the holiday approaches, market transactions were concentrated among traders. In east China, trading was active, with SMM A00 aluminum at a discount of 30 yuan/mt against the SHFE 2502 contract, narrowing by 20 yuan/mt from the previous trading day. SMM A00 aluminum ingot was recorded at 20,240 yuan/mt, down 80 yuan/mt from the previous trading day. In central China, north-west China supplies have not significantly entered warehouses, and the overall market showed weak supply and demand. After the futures market pulled back today, suppliers' sentiment to stand firm on quotes strengthened, with actual transactions mainly at parity to a premium of 20 yuan/mt against SMM central China prices.

Secondary Aluminum Raw Materials: On Wednesday, primary aluminum spot prices fell by 80 yuan/mt from the previous trading day, with SMM A00 spot aluminum closing at 20,240 yuan/mt. Aluminum scrap prices fluctuated rangebound following aluminum prices. Fundamentals showed a short-term weak supply and demand pattern, with small and medium suppliers clearing inventories and mostly entering holiday mode, while large and medium enterprises continued procurement and sales. Aluminum scrap prices largely followed aluminum price movements. On Wednesday, baled UBC aluminum scrap was quoted at 14,850-15,700 yuan/mt (excluding tax), and shredded aluminum tense scrap was quoted at 16,350-17,850 yuan/mt (liquid aluminum, excluding tax). As the Chinese New Year holiday approaches, traders gradually entered holiday mode, tightening market supply. Overall transactions were moderate, and primary aluminum prices maintained an upward trend. In the short term, the price difference between primary metal and scrap is expected to fluctuate.

Secondary Aluminum Alloy: On Wednesday, aluminum prices slightly declined, with SMM A00 aluminum prices down 80 yuan/mt from the previous trading day to 20,240 yuan/mt, while secondary aluminum prices remained largely stable. Domestically, large secondary aluminum enterprises quoted prices at 20,800-21,100 yuan/mt, while small and medium-sized plants quoted prices at 20,500-20,700 yuan/mt. For imports, ADC12 overseas prices were in the range of $2,440-2,470/mt, with immediate losses narrowing to within 100 yuan, approaching the break-even point. As the Chinese New Year holiday nears, secondary aluminum plants have mostly stopped taking orders and entered a centralized holiday period. Downstream restocking has largely concluded, and with downstream production halts, market transactions continued to weaken. ADC12 prices are expected to remain largely stable before the holiday.

Summary: Macro side, with Trump officially taking office, market sentiment was uncertain due to the unpredictability of tariff policies, and the US dollar index hovered around the 108 level. Domestically, six departments issued a plan to promote long-term funds entering the market, signaling a warming macro atmosphere. Fundamentals side, supply disruptions decreased, and with sufficient supply, the cost side of the aluminum industry eased significantly. The immediate full average cost of domestic aluminum fell to around 19,000 yuan/mt. Specifically, alumina costs accelerated downward over the past week, with reduced purchase willingness for high-priced alumina, leading to expectations of continued declines in spot alumina prices, weakening cost support for aluminum. On the demand side, as the Chinese New Year holiday approaches, aluminum processing plants began to shut down during the week, with demand weakening significantly. Social inventories may enter a buildup cycle during the holiday. In the short term, attention should focus on the pace of changes in domestic and overseas macro sentiment, the impact of falling spot alumina prices on aluminum costs, and the continuation of downstream holiday schedules and pre-holiday restocking.

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