Small and Medium-Sized Processing Enterprises Nearing Holiday; Alumina Production Up YoY This Year [SMM Aluminum Morning Meeting Summary]

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1.1 SMM Aluminum Morning Meeting Summary  

Futures Market: On Tuesday, the most-traded SHFE aluminum 2502 contract opened at 19,765 yuan/mt, hitting a high of 19,835 yuan/mt and a low of 19,755 yuan/mt, before closing at 19,780 yuan/mt, up 15 yuan/mt or 0.08%. On the same day, LME aluminum opened at $2,550/mt, reached a high of $2,562.5/mt and a low of $2,537/mt, and closed at $2,552.5/mt, up $2.5/mt or 0.10%.

Macro Front: (1) Gazprom: The supply of natural gas transiting through Ukraine to Europe has been suspended (bullish ★); (2) Starting January 1, personal housing provident fund loan interest rates have been lowered (bullish ★) 

Fundamentals Side: (1) According to SMM statistics, China's metallurgical-grade alumina production in December 2024 (31 days) increased by 1.67% MoM and was up 9.80% YoY. For the full year of 2024, domestic metallurgical-grade alumina production rose by 4.86% YoY (bearish ★★); (2) SMM learned that a major aluminum smelter in Shandong raised its prebaked anode tender price by 278 yuan/mt MoM in January 2025, with the spot execution price at 4,025 yuan/mt and the acceptance price at 4,041 yuan/mt (bullish ★).

Primary Aluminum Market: On Tuesday morning, SHFE aluminum surged to around 19,800 yuan/mt before dipping slightly to around 19,750 yuan/mt in the second trading session, then rebounded to fluctuate rangebound above the daily average. Specifically, in east China, the market was supported by downstream restocking after the New Year holiday and limited inventories held by suppliers, with spot discounts narrowing slightly and stabilizing around 10 yuan/mt. In central China, the market remained weak as some small and medium-sized enterprises gradually entered the holiday period, leading to continued weakening demand. The price spread between Henan and Shanghai widened to a discount of about 110 yuan/mt. 

Secondary Aluminum Raw Materials: On Tuesday, aluminum prices rebounded slightly, with SMM A00 spot aluminum closing at 19,770 yuan/mt, up 70 yuan/mt from the previous trading day. The aluminum scrap market maintained stable quotes or followed the slight increase, with baled UBC aluminum scrap quoted 0-50 yuan/mt higher than the previous day at 14,750-15,825 yuan/mt (excluding tax), while shredded aluminum tense scrap remained quoted at 16,000-17,300 yuan/mt (liquid aluminum, excluding tax). As year-end approaches and reverse invoicing is set to be fully implemented in many regions starting January 1, individual small traders mostly adopted a wait-and-see attitude, while major traders continued normal transactions. Due to the still-tight aluminum scrap supply, the seller's market dominated, and reverse invoicing currently had limited impact on traders' shipments, with overall market transactions being moderate. On the import side, many companies ceased shipments at year-end, with Malaysia's shredded aluminum tense scrap FOB (weekly) prices remaining unchanged at $2,140-2,170/mt. In the short term, the overall supply in the spot aluminum scrap market remains insufficient, with downstream scrap utilization enterprises actively restocking, providing support for aluminum scrap prices. The price difference between primary metal and scrap is expected to fluctuate rangebound. 

Secondary Aluminum Alloy: On Tuesday, aluminum prices rose slightly, with SMM A00 aluminum prices up 70 yuan/mt from the previous day to 19,770 yuan/mt, while secondary aluminum prices remained stable. Domestically, large secondary aluminum enterprises maintained quotes at 20,500-20,800 yuan/mt, while small and medium-sized plants kept quotes at 20,200-20,400 yuan/mt. On the import side, overseas ADC12 prices were in the range of $2,430-2,460/mt, and due to a slight depreciation of the yuan, the immediate loss per ton for imported ADC12 expanded slightly to around 400 yuan. After three consecutive days of decline, aluminum prices rebounded slightly on Tuesday, with aluminum scrap raw material quotes remaining basically stable and secondary aluminum alloy prices continuing to hold steady. Currently, the aluminum scrap supply remains tight, and secondary aluminum plants face high production costs. Additionally, many secondary aluminum plants reported that reverse invoicing will be fully implemented after January, with attention on its implementation during the week. Some enterprises have reduced operating rates due to raw material shortages or environmental protection-related controls, and finished product inventories at manufacturers remain low. In the short term, secondary aluminum alloy prices are expected to be more likely to rise than fall. 

Summary: On the macro front, the pace of interest rate cuts by the European Central Bank and the US Fed may slow, putting continued pressure on base metals. On the fundamentals side, although multiple aluminum smelters in Sichuan and Guangxi reduced production in December, and some capacity resumption progress stalled, production still showed YoY growth. On the demand side, market demand continued to weaken during the off-season, with operating rates in the aluminum processing industry declining steadily, and some aluminum processing plants nearing holiday shutdowns. Overall, on the macro front, the US Fed's interest rate cut pace remains unclear, and the European Central Bank's rate cuts are delayed. On the fundamentals side, although supply-side pressure has slightly eased, weak demand during the off-season and the risk of inventory buildup in social stocks continue to grow. In the short term, aluminum prices are expected to fluctuate downward. 

[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.]