Trump Officially Takes Office! New Tariff Delay Weakens USD, Boosting Aluminum Prices [SMM Aluminum Morning Meeting Summary]

》Click to View the SMM Aluminum Industry Chain Database

》Subscribe to View SMM Historical Spot Metal Prices

1.21 SMM Aluminum Morning Meeting Summary

Futures Market: The most-traded SHFE aluminum 2503 contract opened at 20,440 yuan/mt overnight, hitting a high of 20,490 yuan/mt and a low of 20,375 yuan/mt, and closed at 20,460 yuan/mt, up 55 yuan/mt or 0.27%. On Monday, it opened at $2,680/mt, reached a high of $2,705/mt and a low of $2,667/mt, and closed at $2,687.5/mt, up $7/mt or 0.26%.

Macro: (1) US media reported that Trump plans to issue a memorandum on trade policy but will not impose new tariffs on his first day in office (bullish★★); (2) Trump officially took the oath of office as US President, delivering the longest inaugural speech since 1929, mentioning topics such as tariffs, energy, and green policies, but not touching on cryptocurrencies. New White House officials stated that the US will withdraw from the Paris Climate Agreement (bearish★); (3) On January 20, Li Qiang, member of the Standing Committee of the Political Bureau of the CPC Central Committee and Premier of the State Council, presided over a symposium with experts, entrepreneurs, and representatives from various fields to solicit opinions on the draft Government Work Report. Li emphasized the need to implement a more proactive fiscal policy and moderately loose monetary policy to provide strong policy support for addressing challenges and promoting development (bullish★).

Fundamentals: (1) According to SMM statistics, aluminum ingot social inventory stood at 455,000 mt on January 20, up 15,000 mt WoW (bearish★★); (2) Aluminum billet social inventory reached 177,800 mt on January 20, up 26,700 mt WoW (bearish★); (3) Customs data showed that China's net imports of primary aluminum in December 2024 were 148,700 mt, down 8% YoY. Cumulative net imports in 2024 totaled 2.0144 million mt, up 45% YoY.

Primary Aluminum Market: On Monday morning, the SHFE aluminum front-month contract fluctuated, with prices pulling back sharply near the close of the first trading session. Fundamentally, aluminum ingot social inventory shifted to inventory buildup, but destocking in Wuxi stimulated market buying sentiment, narrowing spot discounts and improving transactions. Specifically, trading in east China was active, mainly due to continued destocking in Wuxi and insufficient arrivals in north-west China, leading to tight market supply. Suppliers purchased for long-term contracts, and downstream stocking demand remained, narrowing spot discounts. SMM A00 aluminum was at a discount of 60 yuan/mt against the SHFE aluminum 2502 contract, up 20 yuan/mt from the previous trading day. SMM A00 aluminum ingot was recorded at 20,260 yuan/mt, down 80 yuan/mt from the previous trading day. In the central China market, downstream buying sentiment weakened as the Chinese New Year break approached. Some enterprises took the opportunity for technological transformation, reducing purchase willingness. Suppliers accelerated shipments, widening discounts in the central China market.

Secondary Aluminum Raw Materials: On Monday, primary aluminum spot prices fell 80 yuan/mt from the previous trading day, with SMM A00 spot closing at 20,260 yuan/mt. Aluminum scrap market quotations mainly followed the decline. Fundamentals remained tight in the short term, as suppliers gradually entered the Chinese New Year holiday, reducing shipment enthusiasm and lowering market trading activity. Baled UBC aluminum scrap was quoted at 14,850-15,700 yuan/mt (excluding tax), while shredded aluminum tense scrap was quoted at 16,350-17,850 yuan/mt (liquid aluminum, excluding tax). As the Chinese New Year holiday approached, suppliers showed reluctance to sell, and some small plants began to close for the holiday, tightening market supply. Overall transactions were moderate. In the short term, the price difference between primary metal and scrap is expected to fluctuate rangebound.

Secondary Aluminum Alloy: On Monday, aluminum prices declined slightly, with SMM A00 aluminum prices down 80 yuan/mt from the previous trading day to 20,260 yuan/mt, while secondary aluminum prices remained basically stable. Domestically, large secondary aluminum enterprises maintained quotations at 20,800-21,100 yuan/mt, while small and medium-sized plants raised quotations by 0-100 yuan/mt to 20,500-20,700 yuan/mt. For imports, ADC12 overseas prices were in the range of $2,440-2,470/mt. Due to relatively strong domestic prices, the immediate loss on imported ADC12 narrowed to within 200 yuan/mt. With aluminum prices pulling back slightly, most secondary aluminum plants remained stable and cautious. Following the upward movement in SHFE aluminum night session last Friday, some manufacturers actively raised prices by 100 yuan/mt over the weekend. After January 20, secondary aluminum plants will gradually stop taking orders and enter the holiday period. As downstream operations halt for the holiday, market transactions will gradually weaken, with a growing disparity between quoted and actual prices. ADC12 prices are expected to fluctuate within a narrow range this week.

Summary: Macro side, on January 20, Trump officially took office and announced that no new tariffs would be imposed immediately. This news drove the US dollar index to a low of 108.27, boosting base metals. Fundamentals side, supply disruptions decreased, and with ample supply, the cost side of the aluminum industry eased significantly. As of yesterday, the immediate full average cost of domestic aluminum fell to around 19,000 yuan/mt. Specifically, alumina costs accelerated downward over the past week, with reduced purchase willingness for high-priced alumina in the market. Spot alumina prices are expected to continue declining, weakening cost support for aluminum. Demand side, as the Chinese New Year holiday approaches, aluminum processing plants began to close for the holiday this week, leading to a noticeable weakening in demand. Social inventory may enter the inventory buildup cycle during the holiday. In the short term, attention should focus on the pace of changes in domestic and overseas macro sentiment, the impact of falling spot alumina prices on aluminum costs, and the continuation of downstream holiday schedules and pre-holiday stocking.

[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.]