Aluminum Ingot Inventory Continues Destocking; Focus on Pre-Holiday Restocking Rhythm [SMM Aluminum Morning Meeting Summary]

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1.14 SMM Aluminum Morning Meeting Summary 

Futures Market: The most-traded SHFE aluminum 2503 contract opened at 20,270 yuan/mt overnight, hitting a high of 20,285 yuan/mt and a low of 20,205 yuan/mt, before closing at 20,265 yuan/mt, up 10 yuan/mt or 0.05%. LME aluminum opened at $2,561/mt overnight, reaching a high of $2,591.5/mt and a low of $2,561/mt, and closed at $2,573.5/mt, up $5/mt or 0.19%. 

Macro: (1) PBoC Governor Gongsheng Pan stated that multiple monetary policy tools, including interest rates and the reserve requirement ratio, will be comprehensively utilized to maintain ample liquidity and a loose social financing environment. The issuance of RMB-denominated sovereign bonds and central bank bills in Hong Kong will be normalized (bullish★); (2) Sources revealed that breakthrough progress has been made in Gaza ceasefire negotiations (bearish★).

Fundamentals: (1) According to SMM statistics, domestic aluminum ingot social inventory stood at 455,000 mt on January 13, with a WoW destocking of 4,000 mt (bullish★); (2) SMM statistics showed domestic aluminum billet social inventory at 142,600 mt on January 13, with a WoW inventory buildup of 5,600 mt (bullish★).

Primary Aluminum Market: On Monday morning, the SHFE front-month aluminum contract fluctuated upward. Despite continued destocking in social inventories, trading in the spot market was moderate due to high absolute prices. Specifically, in east China, suppliers saw declining inventories, while downstream buyers exhibited renewed caution towards high prices. Spot discounts were around 10 yuan/mt against SMM prices. SMM A00 aluminum recorded a discount of 50 yuan/mt against the SHFE 2501 contract, down 10 yuan/mt from the previous trading day. SMM A00 aluminum ingot was quoted at 20,150 yuan/mt, up 170 yuan/mt from the previous trading day. In central China, downstream demand weakened, but suppliers aimed to maintain premiums due to low inventories, resulting in limited expansion of discounts today.

Secondary Aluminum Raw Materials: On Monday, primary aluminum spot prices rose by 170 yuan/mt from the previous trading day, with SMM A00 spot closing at 20,150 yuan/mt. Aluminum scrap market prices mainly followed the increase, with baled UBC prices up by 100 yuan/mt from the previous day. Suppliers showed reduced willingness to sell, as major downstream SMEs entered the holiday period, while large enterprises focused on stable long-term contract supplies. Overall, pre-holiday stockpiling enthusiasm among downstream buyers was low. Monday's baled UBC aluminum scrap was quoted at 14,850-15,725 yuan/mt (tax excluded), while shredded aluminum tense scrap was quoted at 16,250-17,750 yuan/mt (liquid aluminum, tax excluded). As the Chinese New Year holiday approaches, traders exhibited reluctance to sell, with some small plants gradually shutting down, tightening market supply and leading to moderate transactions. In the short term, the price difference between primary metal and scrap is expected to fluctuate rangebound.

Secondary Aluminum Alloy: On Monday, aluminum prices continued their upward trend, with SMM A00 aluminum prices rising by 170 yuan/mt from the previous trading day to 20,150 yuan/mt, marking a three-day rebound. Secondary aluminum prices actively followed the increase. Domestically, large secondary aluminum enterprises raised quotes by 100 yuan/mt to 20,800-21,000 yuan/mt, while small and medium-sized enterprises increased quotes by 100 yuan/mt to 20,500-20,700 yuan/mt. On the import side, overseas ADC12 prices slightly increased to $2,440-2,470/mt. Due to rising domestic and overseas prices, immediate losses on imported ADC12 remained around 500 yuan/mt. Today's aluminum prices rose above 20,000 yuan/mt again, with secondary aluminum markets generally raising prices by 100 yuan/mt. As the Chinese New Year approaches, upstream aluminum scrap traders gradually entered the holiday period, tightening market supply and causing difficulties in pre-holiday raw material stocking for secondary aluminum plants. On the demand side, due to pre-holiday market fluctuations, downstream stockpiling sentiment was weak, with die-casting plants only stocking minimally. High costs and low inventories provided some support for secondary aluminum alloy prices, and ADC12 prices are expected to remain more likely to rise than fall in the short term. 

Summary: Currently, macro factors are mixed. The Chinese government continues to boost consumption, while regional conflicts remain unresolved, and uncertainties persist regarding the US Fed's interest rate cut pace. Fundamentals side, primary aluminum capacity remained stable in early January, while alumina fundamentals showed a slight surplus. Spot alumina prices may continue their downward trend in the short term, and aluminum industry costs are likely to decline further. Demand side, market demand weakened during the off-season, with operating rates in the aluminum processing industry declining steadily. Some aluminum processing plants are nearing holiday shutdowns. Although pre-holiday stockpiling led to unexpected inventory destocking, providing short-term support for aluminum prices, the sustainability of this trend is expected to be limited. Key areas to watch include the impact of falling spot alumina prices on aluminum production costs, as well as downstream holiday schedules and the continuation of pre-holiday stockpiling activities.

 【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.】