SHFE aluminum likely to stop falling and stabilize on continued inventory reduction and cautious macro sentiment

From a macroeconomic view, the November ADP employment report indicates a cooling U.S. labor market, raising expectations of an upcoming Federal Reserve interest rate cut. The market is eagerly awaiting this Friday's U.S. non-farm payroll data that could hint at the Fed's next interest rate moves. Fundamentally, supply is projected to remain stable short-term, although vigilance is needed for potential southwest aluminum capacity production cuts. On the demand side, domestic downstream operating rates have weakened, but off-season restocking demand has increased, leading to a significant decrease in aluminum ingot inventories and supporting the aluminum price. In December, amid low aluminum prices, high operational cost regions like Chongqing and Guizhou are witnessing shrinking profit margins due to elevated electricity costs. Short-term, after enduring a period of low prices, aluminum now has firm support at current lows. With ongoing inventory reductions, prices are expected to halt their decline and stabilize in the week of Dec 11-15. The most-traded SHFE aluminum contract is projected to trade between 18,300 and 18,900 yuan/mt, while LME aluminum may trade between $2,110 and $2,250 /mt. Continued close observation of domestic supply dynamics and macroeconomic sentiment changes is advised.