Off-Season Demand Affects Aluminum Prices, Short-Term Expected to Fluctuate Downward [SMM Aluminum Morning Brief]

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1.6 SMM Aluminum Morning Meeting Summary 

Futures Market: Last Friday night, the most-traded SHFE aluminum 2502 contract opened at 19,785 yuan/mt, hitting a high of 19,815 yuan/mt and a low of 19,710 yuan/mt, before closing at 19,790 yuan/mt, down 50 yuan/mt or 0.25%. LME aluminum opened at $2,530/mt, reached a high of $2,536.5/mt and a low of $2,491/mt, and closed at $2,494/mt, down $35/mt or 1.38%.

Macro Front: (1) PBOC: Implemented a moderately loose monetary policy, with plans for RRR cuts and interest rate cuts at an appropriate time (bullish★); (2) NDRC: Plans to increase the issuance scale of ultra-long-term special treasury bonds in 2025 (bullish★); (3) Ukrainian forces launched a large-scale offensive in the Kursk direction (bullish★).

Fundamentals: (1) According to SMM statistics, the operating rate of leading domestic aluminum processing enterprises fell 0.8 percentage points WoW to 60.4% (bullish★); (2) In December 2024 (31 days), the total national production of primary aluminum billets was 1.465 million mt, down 12,000 mt MoM from November 2024 (30 days), a decrease of 0.81%; YoY, it increased by 162,000 mt, a growth of 12.4% (bullish★).

Primary Aluminum Market: Last Friday morning, the most-traded SHFE aluminum contract fluctuated downward, plunging to around 19,780 yuan/mt during the session before rebounding to fluctuate near 19,880 yuan/mt. In the spot market, stockpiling during the New Year holiday in east China led to increased outflows from warehouses, slightly tightening market supply and boosting traders' sentiment to stand firm on quotes. However, after the holiday, differences between buyers and sellers became more apparent, and premiums and discounts were more likely to fall than rise. SMM A00 aluminum was on par with the SHFE aluminum 2501 contract, unchanged from the previous trading day. SMM A00 aluminum ingot was recorded at 19,850 yuan/mt, down 20 yuan/mt from the previous trading day. In central China, inventory declines supported stable pick-up by long-term contract clients during the day. Coupled with the weekend effect on Friday, spot order trading was relatively active, narrowing the Henan-Shanghai price spread to a discount of around 90 yuan/mt.

Aluminum Scrap Raw Materials: Last Friday, aluminum prices saw a slight correction, with SMM A00 spot aluminum closing at 19,850 yuan/mt, down 20 yuan/mt from the previous trading day. Aluminum scrap prices remained stable, with baled UBC aluminum scrap quoted at 14,750-15,825 yuan/mt (excluding tax), and shredded aluminum tense scrap quoted at 16,100-17,400 yuan/mt (liquid aluminum, excluding tax), unchanged from the previous day. In the short term, aluminum scrap traders are primarily focused on normal shipments, with tight circulation persisting. Downstream scrap utilization enterprises actively restocked, providing support for aluminum scrap prices. The price difference between primary metal and scrap saw narrow adjustments.

Secondary Aluminum Alloy: Last Friday, aluminum prices slightly declined, with SMM A00 aluminum prices down 20 yuan/mt from the previous day to 19,850 yuan/mt, while secondary aluminum prices remained stable. Domestically, large secondary aluminum enterprises maintained quotes at 20,600-20,900 yuan/mt, while medium and small enterprises quoted 20,300-20,500 yuan/mt. For imports, overseas ADC12 prices ranged from $2,430-2,460/mt, with an immediate loss of around 400 yuan/mt per ton. Last Friday, aluminum price fluctuations were minimal, and the secondary aluminum market remained stable, with manufacturers keeping quotes basically flat. Currently, aluminum scrap supply remains tight, and secondary aluminum plants face high production costs. Some enterprises have reduced operating rates due to raw material shortages or environmental protection-related controls, and finished product inventories 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 Chinese government continues to boost consumption, while regional conflicts remain unresolved. 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 fundamentals side, supply-side pressure has slightly eased, but weak demand during the off-season and the risk of inventory buildup in social stocks persist. In the short term, aluminum prices are expected to fluctuate downward. In the long term, attention should be paid to the US Fed's future stance on interest rate cuts and changes in the pace of consumption recovery. 【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.】