SHFE Aluminum Edged Higher in Night Session, Short-Term Outlook Remains Bullish [SMM Aluminum Morning Meeting Minutes]

SMM Aluminum Morning Conference Minutes, Nov. 3

Futures:On Oct. 31 night session, the most-traded SHFE aluminum contract opened low, then fluctuated higher and stabilized at high levels. It opened at 21,360 yuan/mt, hit a high of 21,470 yuan/mt and a low of 21,355 yuan/mt, and closed at 21,415 yuan/mt, up 0.54% from the previous close. Technically, the MA system showed a bullish alignment (MA5: 21,279 > MA10: 21,215.5 > MA20: 21,058.25 > MA60: 20,808.5), and the MACD 4-hour candlestick maintained a golden cross (DIFF: 103.23, DEA: 96.87). Trend-wise, SHFE aluminum remained in an upward channel. Although prices at night session pulled back from the intraday high, they still closed at 21,415 yuan/mt, above most short-term moving averages, indicating the uptrend remained technically intact. Resistance is expected at 21,350-21,550 yuan/mt, support at 20,650-20,850 yuan/mt.

Macro Front:On the afternoon of Nov. 1 local time, South Korean President Lee Jae-myung and Chinese President Xi Jinping held talks at the Gyeongju National Museum. Xi noted that China values China-South Korea relations, maintains continuity and stability in its policy toward South Korea, and is willing to strengthen communication, deepen cooperation, expand common interests, jointly address challenges, promote the steady and long-term development of the China-South Korea strategic cooperative partnership, and provide more positive energy for regional peace and development. (Bullish★) On Oct. 31, Premier Li Qiang presided over a State Council executive meeting, which called for accelerating scenario cultivation and opening to promote large-scale application of new scenarios. The meeting emphasized prioritizing the layout of new frontier and track scenarios, high-value niche scenarios, and cross-regional comprehensive scenarios to meet industrial development and major technology needs, and advancing scenario resource opening, pilot verification innovation, and business model exploration to form a complete cycle from technological breakthrough to industrial application. (Bullish★)

Fundamentals:Inventory side, SMM statistics showed domestic aluminum ingot inventory in major consumption areas stood at 627,000 mt today, up 8,000 mt WoW from last Thursday and up 1,000 mt WoW from last Monday. With growing in-transit inventory and environmental protection-driven production restrictions curbing demand, inventory is expected to build up again.

Primary Aluminum Market:Last Friday, the most-traded SHFE aluminum contract fluctuated with an overall upward shift in the price center. In east China, aluminum ingot destocking and market optimism about future aluminum prices prompted traders to hold prices firm and were reluctant to sell, with actual transactions at a premium of around 10 yuan/mt against the SMM average price. The east China market selling sentiment index was 3.08 last Friday, up 0.05 WoW; the buying sentiment index was 3.14, up 0.03 WoW. Last Friday, SMM A00 aluminum closed at 21,280 yuan/mt, up 80 yuan/mt from the previous trading day, at parity against the 2511 contract, up 10 yuan/mt from the previous trading day. In central China, trading activity recovered last Friday, with a notable destocking trend providing clear support for aluminum prices. Traders' willingness to purchase and sell both strengthened. According to traders, the impact of environmental protection-driven production restrictions on downstream operations was relatively small, with no significant effects currently observed. Final transaction prices ranged from parity to a premium of 10 yuan/mt against the SMM central China average price. Last Friday, the selling sentiment index in the central China market was 2.89, up 0.03 WoW; the purchasing sentiment index was 2.84, up 0.04 WoW. SMM central China A00 aluminum was recorded at 21,150 yuan/mt, up 90 yuan/mt from the previous trading day, at a discount of 130 yuan/mt against the November contract, up 20 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -130 yuan/mt, narrowing by 10 yuan/mt from the previous trading day.

Recycled Aluminum Raw Materials:Last Friday, spot primary aluminum prices rose compared to the previous trading day, with SMM A00 spot aluminum closing at 21,280 yuan/mt, while aluminum scrap market prices overall held steady. As the traditional peak season approaches its end, tight supply remains the main theme in the aluminum scrap market, with procurement prices staying high, though the sustainability of these elevated levels remains to be seen. Last Friday, baled UBC scrap was quoted in a concentrated range of 16,050-16,550 yuan/mt (tax excluded), while shredded aluminum tense scrap (priced based on aluminum content) was quoted in a concentrated range of 17,700-18,200 yuan/mt (tax excluded). Baled UBC prices held steady WoW, while shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, and mechanical casting aluminum scrap each rose by 100 yuan/mt WoW. Due to improved demand from downstream alloys, shredded aluminum tense scrap prices increased accordingly. Jiangxi, Hubei, Foshan, Anhui, Hunan, and other regions collectively raised quotations for aluminum tense scrap series, with increases ranging from 100-200 yuan/mt. This week, the aluminum scrap market is expected to maintain a relatively strong tone, with the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) potentially shifting upward to 17,800-18,300 yuan/mt. If primary aluminum prices stabilize above the 21,200 yuan/mt level, it will further transmit positive effects, coupled with restocking demand from secondary aluminum enterprises amid low inventories, making it difficult to change the short-term tight supply pattern. Demand side, the end of the traditional peak season and environmental protection-driven production restrictions suppressing demand for wrought aluminum alloy scrap may intensify market divergence. Close attention should be paid to the procurement pace of raw materials by secondary aluminum enterprises as they enter the off-season and the sustainability of end-user orders. If primary aluminum prices retreat after a rapid rise, the aluminum scrap market will face downward pressure, especially for wrought aluminum alloy scrap series, which are at greater risk due to environmental protection-driven production restrictions. Overall, the market will continue to see a tug-of-war between supply and demand, and it is recommended to closely track primary aluminum price trends and policy developments.

Secondary Aluminum Alloy:Last Friday, SMM A00 aluminum prices rose by 80 yuan/mt from the previous day to 21,280 yuan/mt, maintaining a rebound trend, while SMM ADC12 prices held steady at 21,300 yuan/mt. The current tight supply of aluminum scrap remains unchanged, coupled with copper prices repeatedly hitting record highs, which drives up raw material costs, forcing enterprises to procure at high prices to ensure order fulfillment. Due to factors such as insufficient raw material circulation, high-priced raw materials eroding profits, and uncertain policies in regions like Jiangxi and Anhui, industry supply has contracted. Overall demand remains resilient, with some secondary aluminum smelters reporting an increase in orders during the week. However, constrained by low inventories of both finished products and raw materials, enterprises are adopting more cautious order-taking strategies, providing some support to market prices. Overall, the market is currently influenced by a mix of bullish and bearish factors, but support from costs and the supply side dominates. ADC12 prices are expected to be more likely to rise than fall in the short term, with attention needed on raw material prices, inventory changes, and downstream order performance.

Aluminum Market Summary:On the macro front, favorable macro environments both domestically and overseas are present; the meeting between the leaders of China and South Korea aims to stabilize and deepen bilateral strategic cooperative relations. China's State Council held a meeting focused on promoting the industrialisation of cutting-edge technologies by accelerating the cultivation and opening of new scenarios. Supply side, domestic operating aluminum capacity saw limited changes; overseas, overseas aluminum smelters implemented production cuts of 210,000 mt, with further reductions expected in March 2026, reigniting concerns over tight supply. Mid-term attention should be paid to the ramp-up of aluminum projects in Indonesia. Demand side, as aluminum prices are fluctuating at highs and severe haze in central China has led to the introduction of environmental protection-driven production restriction policies, demand is somewhat suppressed. Additionally, high LME aluminum prices have closed the processing trade window, weakening demand for aluminum semis exports. Monitor the destocking cycle of finished product inventories for downstream processed materials under high aluminum prices. Overall, with aluminum prices currently at high levels, downstream processing enterprises are prioritizing destocking of finished product inventories, leading to weaker demand for raw materials. However, aluminum ingot inventories remain relatively low, providing limited fundamental drivers for aluminum prices in the short term. Macro sentiment both domestically and overseas remains relatively optimistic. SHFE aluminum is expected to find support at the 20,800 yuan/mt level, while facing some resistance at 21,500 yuan/mt in the absence of clear fundamental drivers.

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