Macro and fundamentals are mixed with both bullish and bearish factors, aluminum prices fluctuate at highs [SMM Aluminum Morning Meeting Minutes]

SMM Aluminum Morning Conference Minutes, 10.28

Futures:During the night session on October 27, the most-traded SHFE aluminum contract opened at 21,315 yuan/mt, reached a highest price of 21,340 yuan/mt and a lowest price of 21,185 yuan/mt, and finally settled at 21,255 yuan/mt, down 0.49%. The night session showed a retreat from highs, with the price center pulling back after moving higher. Technically, the MA moving averages continued their bullish alignment (MA5: 21,270.00 > MA10: 21,160.00 > MA20: 21,045.75 > MA60: 20,901.00). The MACD 4-hour candlestick showed some change in the red bars, maintaining a golden cross (DIFF: 109.10, DEA: 81.06). Trend-wise, SHFE aluminum remains in an upward channel but is experiencing a pullback. Considering recent highs and lows (low around 20,640, high around 21,365), the resistance is expected in the 21,350-21,550 range, with support in the 20,650-20,850 range.

Macro Front:On October 27, Foreign Minister Wang Yi held a phone conversation with US Secretary of State Rubio. Wang Yi expressed hope that both sides would move towards each other to prepare for high-level interactions and create conditions for the development of bilateral relations. Rubio stated that US-China relations are the most important bilateral relationship in the world and looked forward to sending a positive signal to the world through high-level engagement. (Bullish★) The 2025 Financial Street Forum Annual Conference opened in Beijing on the 27th. He Lifeng, Member of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, attended the opening ceremony and delivered a speech. He Lifeng pointed out that the financial system must go all out to support the completion of the main goals and tasks of the 15th Five-Year Plan and contribute more to building a strong country and advancing national rejuvenation through Chinese modernization. (Bullish★)

Fundamentals:Inventory side, according to SMM statistics, domestic aluminum billet warehouse withdrawals totaled 43,000 mt during October 20-26, flat WoW. Domestic aluminum ingot warehouse withdrawals totaled 130,700 mt during the same period, down 5,800 mt WoW. Cost side, boosted by continuously falling alumina prices, aluminum cost continued its downward trend. According to SMM data on Monday, the average aluminum industry cost was 16,052 yuan/mt, down 66 yuan/mt WoW; the average industry profit simultaneously expanded by 296 yuan/mt to 5,108 yuan/mt. Supply side, domestic operating aluminum capacity remained flat, while overseas supply is expected to decline, potentially supporting overseas aluminum prices. Demand side, some downstream enterprises reported a decrease in orders on hand in October, with limited room for further demand growth ahead, but overall demand performance remains stable in the short term.

Primary Aluminum Market:Yesterday, SHFE aluminum mainly showed a retreat after a rapid rise in the early session; after pulling back, its trading center hovered around 21,240 yuan/mt. In east China, high absolute prices boosted suppliers' willingness to sell, but the weakening spot-futures price spread led some suppliers to adopt a wait-and-see attitude, resulting in weaker transactions. Actual transactions were at a discount of around 10 yuan/mt against the SMM average price. On Monday, the selling sentiment index in the east China market was 2.85, down 0.01 WoW, while the purchasing sentiment index was 2.79, down 0.1 WoW. On Monday, SMM A00 aluminum closed at 21,160 yuan/mt, up 50 yuan/mt from the previous trading day, at a discount of about 40 yuan/mt against the 2511 contract, down 10 yuan/mt from the previous trading day. In central China, high absolute prices spurred strong selling interest, but downstream purchasing remained weak. Currently, traders are purchasing to fulfill long-term contracts and for arbitrage opportunities. Later, traders with capital are expected to stockpile at discounts, reducing circulating inventory and increasing hedging demand for purchases. Actual transactions mainly hovered around a discount of 10 yuan/mt against the SMM average price. On Monday, the selling sentiment index in the central China market was 2.87, up 0.01 WoW, while the purchasing sentiment index was 2.83, down 0.08 WoW. SMM A00 aluminum in central China was recorded at 21,030 yuan/mt, up 40 yuan/mt from the previous trading day, at a discount of 170 yuan/mt against the November contract, down 20 yuan/mt from the previous trading day. The price difference between Henan and Shanghai was -130 yuan/mt, down 10 yuan/mt from the previous trading day.

Recycled Aluminum Raw Materials:On Monday, spot primary aluminum prices continued to rise from the previous trading day, with SMM A00 spot aluminum closing at 21,160 yuan/mt, while aluminum scrap prices remained largely flat overall. As the traditional peak season nears its end, tight supply remains the main theme in the aluminum scrap market, keeping procurement prices high, though the sustainability of these high levels remains to be seen. On Monday, baled UBC was quoted in a range of 16,000-16,500 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was quoted in a range of 17,300-17,800 yuan/mt (ex-tax). Baled UBC rose 50 yuan/mt WoW, while shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, and mechanical casting aluminum scrap remained flat WoW. Recently, reports from Henan and Hubei indicated price reductions for wrought aluminum alloy scrap in the extrusion category, with reductions ranging from 300-800 yuan/mt. SMM attributes this to rapidly declining orders and insufficient demand as the peak season approaches its end. Regarding the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai widened by 50 yuan/mt from the previous day to 2,422 yuan/mt, while the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan widened by 50 yuan/mt from the previous day to 2,311 yuan/mt. The aluminum scrap market is expected to hold up well this week, with mainstream prices for shredded aluminum tense scrap (priced based on aluminum content) hovering around 17,500-18,000 yuan/mt. Primary aluminum prices stabilizing above the 21,000 yuan/mt mark will further transmit positive effects, supporting aluminum scrap prices, while the tight supply situation is unlikely to change in the short term. Demand side, demand resilience in sectors such as NEVs and PV remains, but the end of the traditional peak season and high social inventory pressure may curb purchasing enthusiasm. Attention should be paid to the post-holiday restocking pace of secondary aluminum enterprises and the sustainability of end-use demand. If primary aluminum prices retreat after a rapid rise or downstream demand falls short of expectations, the aluminum scrap market may face downward pressure. Overall, the market will continue to see a tug-of-war between sellers and buyers, requiring close monitoring of primary aluminum price trends and policy developments.

Secondary Aluminum Alloy:On Monday, the SMM A00 aluminum price stood at 21,160 yuan/mt, up 60 yuan/mt from the previous day, while the SMM ADC12 price held steady at 21,200 yuan/mt. The tight supply of aluminum scrap persists, and procurement costs have climbed further. To ensure order fulfillment, enterprises generally purchased at high prices, with low-priced supplies being scarce. Factors such as insufficient raw material availability, squeezed profits due to high-cost raw materials, and policy uncertainties in regions like Jiangxi and Anhui have led to a contraction in industry supply. Overall demand remains resilient, coupled with low finished product inventories at manufacturers and ongoing pressure for order delivery, providing some support to market prices. In the short term, supported by rigid costs and a tight supply-demand balance, ADC12 aluminum alloy ingot prices are expected to hold up well. Going forward, close attention should be paid to raw material supply, consumption performance, and inventory changes.

Aluminum Market Summary:Overall, the macro front is favorable, with optimism over a potential U.S.-China trade agreement boosting risk appetite, alongside positive domestic macroeconomic sentiment, collectively supporting market confidence. Fundamentally, overseas supply is expected to tighten, while domestic supply remains stable. Overall aluminum supply and demand are projected to tighten. Inventory data on Monday indicated a buildup, though the overall destocking trend persists. Cost side, support has weakened somewhat due to falling alumina prices. In the short term, amid macro tailwinds and mixed fundamental factors, aluminum prices are expected to fluctuate at highs.

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