SHFE Aluminum Hits New Yearly High in Night Session, Aluminum Prices Continue to Fluctuate at Highs [SMM Aluminum Morning Meeting Minutes]

11.7 SMM Aluminum Morning Meeting Minutes

Futures:During the night session on November 6, the most-traded SHFE aluminum contract rose to the year's high before pulling back and fluctuating at highs. The 2512 contract opened at 21,605 yuan/mt, hit a high of 21,705 yuan/mt and a low of 21,520 yuan/mt, and closed at 21,535 yuan/mt, down 0.44% from the previous close. Technically, the MA system showed a bullish alignment (MA5: 21,525 > MA10: 21,396.5 > MA20: 21,194 > MA60: 20,879.67), and the MACD on the 4-hour candlestick maintained a golden cross (DIFF: 125.12, DEA: 119.44). Trend-wise, although prices retreated from the high during the night session, they still closed at 21,535 yuan/mt, above most short-term moving averages, indicating the current upward trend remains technically intact, though short-term pullback risks warrant attention.

Macro Front:Xi Jinping emphasized during a work report on the Hainan Free Trade Port that building the port is a major decision made by the CPC Central Committee to deepen reform and opening up in the new era. It is essential to thoroughly study and implement the spirit of the Fourth Plenary Session of the 20th CPC Central Committee, and under the centralized and unified leadership of the Central Committee, all relevant parties should collaborate closely and take proactive steps to fully achieve the construction goals of the Hainan Free Trade Port through sustained efforts. (Bullish ★) US Fed Governor Milan stated that the Fed is expected to cut interest rates in December, hoping to adjust rates to a neutral level in 50-basis-point increments; many colleagues prefer 25-basis-point adjustments. (Bullish ★)

Fundamentals:Inventory side, according to SMM statistics, the combined aluminum ingot inventory across three major regions in China stood at 468,500 mt on November 6, down 4,000 mt from the previous period. The combined aluminum billet inventory in two regions was 102,500 mt, flat from the previous period, with Guangdong seeing a destocking of 1,500 mt, while Wuxi experienced an inventory buildup of 1,500 mt.

Primary Aluminum Market:Yesterday, SHFE aluminum fluctuated downward in the morning session, but its trading center shifted higher compared to the previous trading day's morning session. During the second trading session, the center rose further, approaching a high near 21,500 yuan/mt. In east China, as the absolute price rebounded, trading sentiment weakened slightly. Sellers initially quoted around the SMM average price at the open, but transactions were generally muted, with actual deals mainly at discounts of 10 yuan/mt to parity against the SMM average price. Yesterday, the east China market selling sentiment index was 2.87, up 0.01 MoM, while the buying sentiment index was 2.78, down 0.02 MoM. The SMM A00 aluminum price was 21,360 yuan/mt, up 60 yuan/mt from the previous trading day, at a discount of about 30 yuan/mt against the 2511 contract, down 10 yuan/mt from the previous day. In central China, aluminum prices edged up yesterday, but in-transit cargoes decreased, Gongyi aluminum ingot inventory destocked, suppliers held prices firm and were reluctant to sell, market availability tightened, procurement sentiment in the central China market improved further, and actual transaction prices were at a premium of 10-20 yuan/mt against the SMM central China average price. Yesterday, the selling sentiment index in the central China market was 2.89, down 0.01 MoM; the purchasing sentiment index was 2.88, up 0.03 MoM. SMM central China closed at 21,240 yuan/mt, up 80 yuan/mt from the previous trading day, at a discount of 150 yuan/mt against the November contract, up 10 yuan/mt from the previous trading day, and the Henan-Shanghai price spread was -120 yuan/mt, up 20 yuan/mt from the previous trading day.

Recycled Aluminum Raw Materials:Yesterday, spot primary aluminum prices rose compared to the previous trading day, with SMM A00 spot closing at 21,360 yuan/mt, and aluminum scrap market prices followed aluminum higher. As the traditional peak season ended, downstream demand diverged significantly. Stable demand for scrap used in cast aluminum alloys provided more consumption support, while demand for scrap used in wrought aluminum alloys showed initial signs of weakening. However, tight market supply remained the main theme, keeping procurement prices high, though the sustainability of high levels needs observation. Yesterday, baled UBC was mainly offered at 16,000-16,650 yuan/mt (ex-tax), shredded aluminum tense scrap (priced based on aluminum content) was mainly offered at 17,550-18,050 yuan/mt (ex-tax). Baled UBC prices held steady, while clean tapping aluminum wire, shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, mechanical casting aluminum scrap, etc., rose 50-100 yuan/mt MoM today. Yesterday, spot aluminum prices pulled back, and aluminum scrap prices in Shanghai, Zhejiang, Jiangsu, and other regions followed with slight corrections. 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 60 yuan/mt MoM to 2,622 yuan/mt, and the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan widened by 38 yuan/mt MoM to 2,266 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) potentially moving up to 18,000-18,500 yuan/mt. If primary aluminum prices continue to rise, it will further transmit positive effects, coupled with restocking demand from secondary aluminum enterprises amid low inventory, the tight supply pattern is difficult 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, requiring close attention to the procurement pace of raw materials by secondary aluminum enterprises entering 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 correction pressure, especially wrought aluminum alloy scrap varieties, which are at greater risk from 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 primary aluminum trends and policy developments.

Secondary Aluminum Alloy:Cast aluminum alloy futures held up well this week, overall trading in the range of 20,600-20,850 yuan/mt. As of Thursday, the most-traded 2601 contract closed at 20,705 yuan/mt. In the spot market, ADC12 prices rose steadily, with the SMM offer reaching 21,300 yuan/mt as of October 30, up 100 yuan/mt WoW. Cost side, affected by tight supply, aluminum scrap (especially aluminum tense scrap) prices continued to climb. Meanwhile, copper prices repeatedly hit new highs, coupled with rising silicon prices, further pushing up raw material costs for secondary aluminum plants. Against this backdrop, aluminum alloy prices such as A380 with higher copper content also increased, and the current premium of A380 over ADC12 has widened to 1,100-1,400 yuan/mt. Demand side, secondary aluminum demand remained stable with a positive trend this week, as enterprises reported slight order increases in sectors like automotive, but constrained by low inventories of both finished products and raw materials, order-taking strategies became more cautious. Supply side, driven by improved orders, the operating rate of leading secondary aluminum enterprises edged up 0.5 percentage points WoW to 59.1%, but industry-wide operating rate increases still faced pressure: besides persistent factors such as raw material shortages, production losses, and policy uncertainties that constrained production this month, some alloy plants in Hebei and other regions saw lower operating rates due to environmental protection-related controls. Import side, overseas ADC12 offers rose to $2,560-2,590/mt, and coupled with the strengthening RMB, the immediate import loss per ton narrowed to within 200 yuan. Overall, bullish and bearish factors are intertwined in the current market, but cost and supply-side support dominate, and 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:Overall, on the macro front, optimistic sentiment persisted both domestically and overseas. Fundamentally, environmental protection restrictions in November during winter are expected to affect the operating rates of individual enterprises, but considering that aluminum production cannot immediately drop to zero after pot shutdowns, production changes are expected to be relatively small. Regarding the proportion of liquid aluminum, some enterprises reported that end-user demand is expected to weaken next month, and the proportion of liquid aluminum is likely to pull back. Inventory side, as the traditional peak season ends, the proportion of liquid aluminum faced some pressure at highs in November, aluminum ingot supply pressure increased, and demand stability was hard to ensure under high aluminum prices; SMM expects domestic aluminum ingot inventory to stabilize with a slight increase in the first half of November, operating around 600,000-650,000 mt. Overall, although fundamental drivers are limited, macro performance remains optimistic both domestically and overseas, and aluminum prices are expected to continue fluctuating at highs, with SHFE aluminum forecast to trade at 21,300-21,900 yuan/mt and LME aluminum at $2,830-2,930/mt next week.

[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make decisions cautiously and not use this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]