International Situation Remains Unclear, Aluminum Market Continues to Fluctuate Rangebound [SMM Aluminum Morning Briefing Dec 4]

Overnight, the most-traded SHFE aluminum 2501 contract opened at 20,430 yuan/mt, reaching a high of 20,440 yuan/mt and a low of 20,340 yuan/mt, and closed at 20,405 yuan/mt, up 25 yuan/mt or 0.12% from the previous day. On Tuesday, LME aluminum opened at $2,597.5/mt, hit a high of $2,617/mt, a low of $2,575/mt, and closed at $2,607/mt, up $6.5/mt or 0.25%.

Summary: On the macro front, political disputes in South Korea have intensified, and the situations in the Middle East and Russia-Ukraine remain unclear, reigniting market risk aversion sentiment. US Fed officials are open to an interest rate cut in December, leading to a slight rebound in the non-ferrous metals market. Domestically, positive signals were released, with November's manufacturing PMI above the 50 mark, but potential risks of tariff and trade wars need attention. Fundamentals side, high costs of aluminum have raised concerns about production cuts among high-cost enterprises, but buying sentiment in the downstream has weakened due to the off-season, leading to weak spot market performance. Inventory-wise, although the shipping pace of goods from Xinjiang has recently eased, causing domestic aluminum ingot inventory to fluctuate, it is expected that the backlog in Xinjiang will continue to ease, and concentrated arrivals may pose pressure and risks. Meanwhile, although the year-end inventory buildup inflection point has been delayed, the limited sustainability of aluminum ingot outflows from warehouses during the off-season means that low inventory continues to provide short-term support for aluminum prices, but excessive optimism is not advisable. In the short term, the cancellation of export tax rebates for aluminum semis in December will negatively impact mid-term aluminum demand, but short-term market sentiment has somewhat eased, and the cost side continues to provide strong support. It is expected that aluminum prices will mainly fluctuate rangebound in the near term.