The Government Continues Efforts to Boost Consumption, Aluminum Prices Slightly Rebound [SMM Aluminum Morning Meeting Summary]

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1.8 SMM Aluminum Morning Meeting Summary 

Futures Market: Overnight, the most-traded SHFE aluminum 2502 contract opened at 19,735 yuan/mt, reached a high of 19,785 yuan/mt, a low of 19,710 yuan/mt, and closed at 19,745 yuan/mt, up 65 yuan/mt or 0.33%. Yesterday, LME aluminum opened at $2,491/mt, hit a high of $2,524/mt, a low of $2,484/mt, and closed at $2,522.5/mt, up $31/mt or 1.24%.

Macro Front: (1) The US November JOLTs job openings recorded 8.098 million, exceeding market expectations, with the previous value revised upward. The December ISM Non-Manufacturing PMI recorded 54.1, also surpassing market expectations. After the data release, traders no longer fully priced in the US Fed cutting interest rates before July (bearish★); (2) He Lifeng held a video call with US Treasury Secretary Janet Yellen (bullish★).

Fundamentals Side: (1) According to SMM statistics, as of January 7, aluminum ingot inventories were 116,100 mt in Guangdong, 164,600 mt in Wuxi, and 68,800 mt in Gongyi, with total inventories across the three regions down by 10,700 mt compared to the previous trading day (bullish★). (2) As of January 7, 2025, SMM statistics showed that the comprehensive operating rate of the domestic aluminum wire and cable industry in December 2024 was 51.01%, down 8.95% MoM but up 3.28% YoY compared to December 2023 (bearish★).

Primary Aluminum Market: On Tuesday morning, the most-traded SHFE aluminum contract fluctuated around 19,650 yuan/mt, with the center shifting to around 19,620 yuan/mt in the second trading session. In the spot market, alumina prices have seen a significant correction, and downstream aluminum semis producers have become more bearish on aluminum prices. Coupled with some enterprises in east China gradually entering the Chinese New Year holiday, demand has weakened, and market premiums have declined. SMM A00 aluminum was at a discount of 20 yuan/mt to the SHFE 2501 contract, down 20 yuan/mt from the previous trading day. SMM A00 aluminum ingot was recorded at 19,640 yuan/mt, up 10 yuan/mt from the previous trading day. In the central China market, daily inventory in major warehouses decreased by 5,400 mt to 68,800 mt, boosting traders' confidence to stand firm on quotes. However, amid the off-season atmosphere, actual market trading volume showed minimal change compared to the previous day, and expectations for further weakening have intensified.

Aluminum Scrap Market: On Tuesday, aluminum prices stabilized, showing relatively steady performance. SMM A00 spot aluminum closed at 19,640 yuan/mt, up 10 yuan/mt from the previous trading day. The aluminum scrap market remained stable overall. On Tuesday, baled UBC aluminum scrap was quoted at 14,750-15,525 yuan/mt (excluding tax), unchanged from the previous day, while shredded aluminum tense scrap was quoted at 16,000-17,300 yuan/mt (excluding tax). With minor fluctuations in aluminum prices on Tuesday, the aluminum scrap market remained relatively stable. Currently, the circulation of aluminum scrap, especially aluminum tense scrap, is tight. As the Chinese New Year holiday approaches, downstream scrap utilization enterprises are actively restocking, providing support for aluminum scrap prices. In the short term, the price difference between primary metal and scrap is expected to fluctuate rangebound.

Secondary Aluminum Alloy Market: On Tuesday, aluminum prices fluctuated narrowly around the 19,600 yuan/mt level, with SMM A00 aluminum prices up 10 yuan/mt from the previous day to 19,640 yuan/mt. Secondary aluminum prices generally remained stable. Domestically, large secondary aluminum enterprises quoted prices at 20,500-20,800 yuan/mt, while medium and small enterprises quoted prices at 20,300-20,500 yuan/mt. For imports, overseas ADC12 prices ranged from $2,430-2,460/mt, with an immediate loss of around 500 yuan/mt per ton for imports. On Tuesday, aluminum prices showed minimal fluctuations, and the secondary aluminum market remained relatively stable, with manufacturers' quotes largely unchanged from the previous day. Currently, raw material supply remains tight, production costs for secondary aluminum plants are high, and finished product inventories are relatively low, providing some support for secondary aluminum alloy prices. In the short term, ADC12 prices are expected to remain more likely to rise than fall.

Summary: On the macro front, the Chinese government continues to focus on boosting consumption, while uncertainty over the US Fed's interest rate cut timeline has increased. 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 remain on 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 prudent decisions and not substitute this for independent judgment. Any decisions made by clients are not related to SMM.】