Macro vs. Fundamentals, Aluminum Prices Hover at Highs in the Short Term [SMM Aluminum Morning Meeting Minutes]

November 6 SMM Aluminum Morning Conference Minutes

Futures:During the night session on November 5, the most-traded SHFE aluminum contract opened lower, then surged before entering a consolidation phase. The 2512 contract opened at 21,355 yuan/mt, hit a high of 21,475 yuan/mt, touched a low of 21,330 yuan/mt, and closed at 21,450 yuan/mt, up 0.26% from the previous close. Technically, the MA system showed a bullish alignment (MA5: 21,442 > MA10: 21,347.5 > MA20: 21,158 > MA60: 20,861.42), but a death cross formed between the DIFF (115.12) and DEA (116.08) on the 4-hour MACD candlestick indicator. In terms of trend, SHFE aluminum pulled back after hitting a recent high of 21,655, facing short-term technical correction pressure. The night session closed at 21,450 yuan/mt, converging with the MA5, indicating weakened short-term bullish momentum and highlighting the need to watch for near-term correction risks.

Macro Front:At the regular press conference held yesterday, Foreign Ministry Spokesperson Mao Ning stated that China’s policy toward the US remains stable, and China always views and handles China-US relations based on the principles of mutual respect, peaceful coexistence, and win-win cooperation. At the same time, China firmly safeguards its own sovereignty, security, and development interests. Maintaining the sound and stable development of China-US relations aligns with the fundamental interests of both peoples and is widely expected by the international community. (Neutral) According to the National Energy Administration, by the end of September, China’s new-type energy storage installations exceeded 100 million kW, up more than 30 times compared to the end of the 13th Five-Year Plan period. The installation scale accounted for over 40% of the global total, ranking first in the world. (Bullish★)

Fundamentals:Inventory side, SMM statistics showed that spot aluminum ingot inventories in major domestic consumption areas totaled 622,000 mt today, down 5,000 mt from Monday but up 3,000 mt WoW.

Primary Aluminum Market:On Wednesday, spot primary aluminum prices fell compared to the previous trading day, with SMM A00 aluminum closing at 21,300 yuan/mt. Aluminum scrap prices followed the decline. As the traditional peak season ended, downstream demand showed clear divergence. Demand for scrap used in cast aluminum alloys remained robust, providing more consumption support, while demand for scrap used in wrought aluminum alloys began to show signs of weakening. However, tight market supply remained the main theme, keeping procurement prices high, though the sustainability of these high levels remains to be seen. On Wednesday, baled UBC was quoted in a range of 16,000-16,650 yuan/mt (ex-tax), shredded aluminum tense scrap (priced based on aluminum content) was quoted at 17,500-18,000 yuan/mt (ex-tax). Prices for baled UBC, clean tapping aluminum wire, shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, and mechanical casting aluminum scrap dropped 50-150 yuan/mt WoW on Wednesday. Spot aluminum prices pulled back this Wednesday, and aluminum scrap prices in Shanghai, Zhejiang, Jiangsu, and other regions followed with a slight correction. Regarding the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai narrowed by 140 yuan from the previous trading day to 2,565 yuan/mt, while the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan widened by 22 yuan/mt from the previous trading day to 2,304 yuan/mt. Aluminum scrap market is expected to hold up well this week, with the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) likely shifting up to 18,000-18,500 yuan/mt. If primary aluminum prices continue to rise, it will further transmit positive effects. Combined with the restocking demand of secondary aluminum enterprises amid low inventory, the tight supply situation is unlikely to change in the short term. 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 pullback pressure, especially for wrought aluminum alloy scrap varieties, which are at greater risk due to environmental protection-driven production restrictions. Overall, the market will continue the tug-of-war between sellers and buyers, and it is recommended to closely track the trend of primary aluminum and policy developments.

Recycled Aluminum Raw Materials:Spot primary aluminum prices rose on Tuesday this week compared to the previous trading day, with the SMM A00 spot price closing at 21,440 yuan/mt. Aluminum scrap market prices followed the upward trend of aluminum prices. As the traditional peak season ended, downstream demand showed significant divergence. Demand for aluminum scrap used in cast aluminum alloys remained robust, providing more consumption support, while demand for aluminum scrap used in wrought aluminum alloys began to show signs of weakening. However, tight market supply remained the main theme, keeping purchase prices high, though the sustainability of these high levels needs consideration. On Tuesday this week, baled UBC was quoted in a range of 16,100-16,750 yuan/mt (tax excluded), and shredded aluminum tense scrap (priced based on aluminum content) was quoted in a range of 17,900-18,250 yuan/mt (tax excluded). Prices for baled UBC, shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, and mechanical casting aluminum scrap held steady today compared to the previous day. Spot aluminum prices held steady on Tuesday this week, and aluminum scrap prices in major producing regions remained largely stable. Regarding the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai was recorded at 2,702 yuan/mt, while the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan widened by 10 yuan/mt from the previous trading day to 2,326 yuan/mt. Aluminum scrap market is expected to hold up well this week, with the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) likely shifting up to 18,000-18,500 yuan/mt. If primary aluminum prices continue to rise, it will further transmit positive effects. Combined with the restocking demand of secondary aluminum enterprises amid low inventory, the tight supply situation is unlikely to change in the short term. 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 pullback pressure, especially for wrought aluminum alloy scrap varieties, which are at greater risk due to environmental protection-driven production restrictions. Overall, the market is expected to continue the tug-of-war between sellers and buyers, and it is advisable to closely track the movement of primary aluminum prices and policy developments.

Secondary Aluminum Alloy:This Wednesday, the SMM A00 aluminum spot price fell by 140 yuan/mt to 21,300 yuan/mt. In the secondary aluminum market, the ADC12 price dropped by 50 yuan/mt to 21,350 yuan/mt. Against the backdrop of aluminum prices retreating from highs, market quotations diverged: some enterprises quickly followed with a decrease of 100 yuan/mt, while others maintained their quotes and adopted a wait-and-see approach. Due to recent intensified price volatility, downstream procurement has become more cautious, with restocking primarily driven by rigid demand. Raw material supply remains tight, and procurement costs for secondary aluminum plants stay elevated. Coupled with support from the supply side, ADC12 prices are expected to remain firm in the short term.

Aluminum Market Summary:On the macro front, both domestic and overseas macro sentiment remained relatively optimistic. Supply side, domestic operating aluminum capacity saw limited changes. Overseas, an overseas aluminum smelter cut production by 210,000 mt, with further reductions expected in March 2026, reigniting concerns over tight supply. In the medium 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 rollout of environmental protection-driven production restriction policies, demand has been somewhat suppressed. Monitor the destocking cycle of finished product inventories at downstream processing plants amid high aluminum prices. Overall, with aluminum prices currently high, downstream processing enterprises are prioritizing the reduction of finished product inventories, leading to weaker demand for raw materials. However, aluminum ingot inventories remain relatively low. In the short term, fundamental factors provide limited impetus for aluminum price movements, while domestic and overseas macro sentiment remains relatively optimistic.

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