Fundamental Supply Pressure Eases but Demand Remains Weak, Aluminum Prices Fluctuate Slightly [SMM Aluminum Morning Meeting Summary]

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1.7 SMM Aluminum Morning Meeting Summary

Futures Market: Overnight, the most-traded SHFE aluminum 2502 contract opened at 19,630 yuan/mt, hit a high of 19,725 yuan/mt, a low of 19,615 yuan/mt, and closed at 19,660 yuan/mt, down 10 yuan/mt or 0.05%. Yesterday, LME aluminum opened at $2,496/mt, reached a high of $2,514.5/mt, a low of $2,477/mt, and closed at $2,491.5/mt, down $2.5/mt or 0.10%.

Macro Front: (1) US Fed Governor Cook stated that more cautious measures could be taken regarding interest rate cuts (bearish ★); (2) Trump denied reports about a reduction in tariff policies (bearish ★).

Fundamentals Side: (1) According to SMM statistics, as of January 6, China's aluminum ingot social inventory stood at 495,000 mt, an inventory buildup of 8,000 mt WoW (bearish ★); (2) SMM statistics also showed that China's aluminum billet social inventory reached 134,100 mt on January 6, an inventory buildup of 10,700 mt WoW (bearish ★).

Primary Aluminum Market: On Monday morning, the most-traded SHFE aluminum contract fluctuated downward to around 19,580 yuan/mt below the daily moving average. In the spot market, in east China, downstream buyers restocked on dips due to the decline in absolute prices, but transactions only slightly improved compared to last Friday under the off-season shadow, in line with expectations. 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 19,630 yuan/mt, down 220 yuan/mt from the previous trading day. In the central China market, most traders faced significant declines in absolute prices and showed a strong sentiment to stand firm on quotes, while downstream buyers restocked on dips, mainly for rigid demand. The price spread between Henan and Shanghai narrowed to a discount of around 80 yuan/mt.

Aluminum Scrap Raw Materials: On Monday, 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. The aluminum scrap market maintained stable quotes, with baled UBC aluminum scrap quoted at 14,750-15,825 yuan/mt (tax excluded), and shredded aluminum tense scrap quoted at 16,100-17,400 yuan/mt (liquid aluminum, tax excluded), both 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: On Monday, aluminum prices slightly declined, with SMM A00 aluminum prices down 20 yuan/mt from last Friday 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 plants kept quotes at 20,300-20,500 yuan/mt. On the import side, overseas prices for imported ADC12 ranged from $2,430-2,460/mt, with an immediate loss of around 400 yuan/mt per ton. On Monday, 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, with low finished product inventories. 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.]