Macro Fundamentals Trigger Bullish Sentiment Again as Year-End SHFE Aluminum Approaches the 20,500 Mark [SMM Aluminum Futures Brief Review]

Published: Jan 17, 2025 15:30

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[SMM SHFE Aluminum Brief Review: Bullish Sentiment Rises Again on Macro Fundamentals, Year-End SHFE Aluminum Approaches the 20,500 Level] Expectations for US Fed interest rate cuts strengthened again, driving aluminum prices higher overnight. On the fundamentals side, pre-holiday concentrated stockpiling by aluminum processing enterprises, combined with logistics disruptions in some delivery areas, led to an unexpected reduction in aluminum ingot inventory, providing short-term support to aluminum prices.

》Check SMM Aluminum Product Prices, Data, and Market Analysis

SMM, January 17:

Today, the most-traded SHFE aluminum 2503 contract opened at 20,430 yuan/mt, with a high of 20,540 yuan/mt, a low of 20,335 yuan/mt, and closed at 20,470 yuan/mt, up 0.81%. Trading volume was 158,000 lots, and open interest was 203,000 lots.

SMM Comments: Expectations for US Fed interest rate cuts strengthened again, driving aluminum prices higher overnight. On the fundamentals side, pre-holiday restocking by aluminum processing enterprises, combined with logistics disruptions in some delivery areas, led to an unexpected destocking of aluminum ingots, providing short-term support for aluminum prices. However, aluminum supply remains stable, and spot alumina prices continue to decline due to ample supply, reducing cost support for the aluminum industry. On the demand side, as the Chinese New Year approaches, market demand weakens, and some small and medium-sized aluminum processing enterprises are nearing holiday shutdowns, introducing uncertainties to the sustainability of inventory destocking. In the short term, attention should remain on the impact of spot alumina price pullbacks on aluminum costs, as well as downstream holiday schedules and the continuation of pre-holiday restocking.

Today, the most-traded alumina 2502 contract opened at 3,694 yuan/mt, reached a high of 3,885 yuan/mt, a low of 3,633 yuan/mt, and closed at 3,868 yuan/mt, up 2.95%. Trading volume was 325,000 lots, and open interest was 79,000 lots.

SMM Comments: Recently, weekly operating rates for alumina have continued to increase slightly, with no significant changes on the demand side. Low-priced spot transactions have been frequent in the market, with a larger decline compared to earlier periods. In Henan, spot transaction prices on Thursday were 4,050 yuan/mt, down 830 yuan/mt from last Thursday's price of 4,880 yuan/mt. However, as of now, alumina capacity has not entered a large-scale loss-making phase. Alumina supply is expected to maintain high operating rates in the short term, with the supply and demand fundamentals remaining in a slight surplus. Overall, spot alumina prices are expected to continue their downward trend in the short term. Close attention should be paid to bauxite transaction prices, alumina costs, and overseas spot alumina prices.

[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make decisions cautiously and not replace independent judgment with this information. Any decisions made by clients are unrelated to SMM.]

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM‘s internal database model. They are for reference only and do not constitute decision-making recommendations.

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