On January 5, 2026, the first trading day after the New Year's holiday, the SMM A00 aluminum price surged by 850 yuan/mt in a single day, surpassing the largest single-day increase of any day in 2025. As a result, aluminum billet processing fees across regions rapidly pulled back, generally decreasing by 0–160 yuan/mt, but still remaining above the zero line. However, on the following day, January 6, 2026, the aluminum price soared another 600 yuan/mt, initiating an extreme market trend that lasted nearly two weeks—aluminum billet processing fees fell below the zero line and entered negative territory.

Reviewing the aluminum rod market in December, overall supply and demand improved, with processing fees bottoming out and returning to reasonable levels. According to SMM surveys, aluminum rod production totaled 323,800 mt in December, down 5.06% MoM.

[SMM Analysis]High Costs and Weak Demand Converge, Operating Rate of Secondary Aluminum Producers Expected to Remain Weak in January

[SMM Cast Aluminum Alloy Morning Comment: Aluminum Prices Stop Rising and Correct, Weak Downstream Stockpiling Demand Creates Upward Price Pressure] On Thursday, aluminum prices experienced a significant correction, with A00 aluminum prices falling by 480 yuan/mt to 24,190 yuan/mt, while SMM ADC12 prices dropped by 200 yuan/mt to 24,000 yuan/mt. After several consecutive days of gains, aluminum prices cooled but remained above 24,000 yuan/mt. Demand side, the price decline intensified the wait-and-see sentiment among downstream enterprises. Although some die-casting enterprises were forced to restock to maintain production, boosting market inquiry activity this week and showing marginal improvement in purchase willingness, actual transactions remained weak due to losses in production margins for some downstream enterprises. Some secondary aluminum plants saw a notable decline in orders. In the short term, secondary aluminum alloy prices are expected to continue fluctuating at highs. On one hand, cost support has weakened, coupled with the dual pressures of the off-season and losses suppressing downstream demand, leading to sluggish market trading activity. On the other hand, uncertainties in regional tax policies, rigid supply constraints from environmental protection-driven production restrictions, and support from macro tailwinds continue to provide a floor for prices.

[SMM Aluminum Morning Meeting Minutes: Macro Sentiment Mixed with Long and Short Factors, Fundamentals Show No Significant Improvement] Overall, current macro news presents a mixed picture with both bullish and bearish factors, while fundamentals remain relatively weak in the short term. However, bullish sentiment toward aluminum futures prices among investors has not completely cooled, and aluminum prices are expected to hover at highs.

[SMM Aluminum Price Weekly Review: Macro Factors Mixed, Bullish Sentiment Slightly Cooled in the Latter Part of the Week, Aluminum Prices Expected to Mainly Fluctuate at Highs in the Short Term]

Supported by strong domestic and overseas macro sentiment, the SHFE aluminum price hit a record high during the week and remained elevated without showing a clear correction trend. Against the backdrop of persistently strong aluminum prices, aluminum billet processing fees extended their decline initially before slightly recovering, remaining in a phase of deep adjustment. By region, Foshan stood at -50/0 yuan/mt, up 90 yuan/mt WoW; Wuxi was at -50/0 yuan/mt, up 100 yuan/mt and down 50 yuan/mt respectively WoW; Nanchang was at -150/-100 yuan/mt, flat WoW. Due to the divergence between current prices and the monthly average from the previous month, varying destocking needs emerged in the market, leading to chaotic processing fee quotes and wide price spreads. Meanwhile, seasonal bearish factors such as strong fear of high prices among downstream users and weak demand further stimulated destocking demand, causing aluminum billet processing fees to trade below parity. Under the current oversupply situation, aluminum billet processing fees are expected to remain in the doldrums. However, due to limited availability of low-priced sources amid wide price spreads, processing fees are likely to converge to parity or above.