Domestic Demand Expansion Policies Continue to Take Effect, Optimistic Sentiment Boosts Aluminum Prices to Fluctuate at Highs [SMM Aluminum Morning Meeting Minutes]

SMM Aluminum Morning Meeting Minutes, 11.10

Futures:Based on the SHFE aluminum 2601 contract, the technicals from Friday's night session showed: The price settled at 21,555 yuan/mt, down 0.46%, below all key moving averages (MA5=21,557, MA10=21,558.5, MA30=21,558.33, MA60=21,558.5), indicating a short-term bearish bias; In the MACD indicator, the DIF was -0.4165, DEA was 0.0742, and the MACD histogram was -0.9815, confirming strengthening bearish momentum; Trading volume was 86,468 lots, with daily position change at -6,648 lots, indicating selling on the decline and significant selling pressure. Referencing recent highs and lows (high 21,710, low 21,535), near-term resistance is expected around the MA5 near the 21,557-21,580 range, with support at 21,535; a break below could test 21,300-21,400. Overall technicals are weak, suggesting focus on the effectiveness of the 21,535 support; any rebound needs to break above 21,600 to alleviate downward pressure.

Macro Front:The National Bureau of Statistics (NBS) reported that in October, policies such as expanding domestic demand continued to take effect, coupled with the boost from the National Day and Mid-Autumn Festival holidays, the CPI rose 0.2% MoM and 0.2% YoY, while the core CPI excluding food and energy prices rose 1.2% YoY, marking the sixth consecutive month of widening growth. (Bullish ★) The US federal government shutdown has lasted 40 days. US Treasury Secretary Besant told media that if the shutdown persists, US economic growth in Q4 this year "will be halved." US Senate Majority Leader John Thune stated that a potential agreement to end the government shutdown "is gradually being reached." (Neutral ★)

Fundamentals:According to SMM statistics, China's aluminum production in October 2025 (31 days) increased 1.13% YoY and 3.52% MoM. The traditional peak season continued in October; although the "October peak season" was somewhat less robust than expected, as downstream processing plants supporting aluminum smelters commenced operations and raised production, the proportion of liquid aluminum at domestic aluminum smelters rebounded more than expected, with the industry's proportion of liquid aluminum rising 1.4 percentage points MoM to 77.7% this month. Based on SMM's proportion of liquid aluminum data, domestic aluminum casting ingot volume in September decreased 13.5% YoY and 2.6% MoM to around 834,000 mt. Cost side, although the real-time cost for aluminum edged higher WoW, the strong aluminum price left the high profit margins of aluminum smelters unaffected, rising about 72 yuan/mt WoW to 16,115 yuan/mt as of last Thursday; the immediate theoretical profit for aluminum increased 87 yuan/mt MoM to 5,244 yuan/mt. Demand side, entering November, the industry is in a transition phase between peak and off-seasons, coupled with persistently high aluminum prices, downstream procurement is primarily for rigid demand; extrusion enterprises generally reported a decrease in orders on hand, and operating rates showed a pullback trend. Last week, China's aluminum extrusion operating rate recorded 52.6%, down 0.9 percentage points WoW. Other downstream sectors also showed varying degrees of weakening in operating performance. Inventory-wise, according to SMM statistics, domestic primary aluminum ingot inventory in major consumption areas recorded 622,000 mt this Thursday, down 5,000 mt from this Monday, but up 3,000 mt WoW from last Thursday. SMM expects domestic aluminum ingot inventory to stabilize with a slight increase in the first half of November, fluctuating around 600,000-650,000 mt.

Primary Aluminum Market:Last Friday, SHFE aluminum fluctuated in early trading, hovering around 21,570 yuan/mt. In east China, high absolute prices led to poor buying sentiment among end-users, with sporadic transactions at a small discount to the SMM average price. However, as the price spread between futures contracts widened slightly, traders showed moderate purchasing enthusiasm, with good transactions at parity to the SMM average price and sporadic transactions at a small premium to the SMM average price. Last Friday, the east China market selling sentiment index was 2.97, up 0.10 WoW; the buying sentiment index was 2.87, up 0.09 WoW. Last Friday, SMM A00 aluminum closed at 21,540 yuan/mt, up 180 yuan/mt from the previous trading day, at a discount of about 30 yuan/mt against the 2511 contract, flat from the previous trading day. With aluminum prices at high levels, trading in the central China market was relatively sluggish last Friday. Pre-market offers were mostly at a premium of 10 yuan to the central China price, but downstream fear of high prices was significant, resulting in limited purchases. Actual transaction prices mainly ranged from parity to a premium of 10 yuan against the central China price. Last Friday, the central China market selling sentiment index was 2.89, flat WoW; the buying sentiment index was 2.87, down 0.01 WoW. SMM central China closed at 21,420 yuan/mt, up 180 yuan/mt from the previous trading day, at a discount of 150 yuan/mt against the November contract, flat from the previous trading day. The Henan-Shanghai price spread was -120 yuan/mt, flat from the previous trading day.

Recycled Aluminum Raw Materials:This Friday, spot primary aluminum prices rose significantly compared to the previous trading day, with SMM A00 spot closing at 21,540 yuan/mt. Aluminum scrap market prices followed aluminum higher. As the traditional peak season ended, downstream demand showed clear divergence: demand for scrap used in cast aluminum alloys remained stable, 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. This Friday, baled UBC was quoted at 16,100-16,600 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was quoted at 17,700-18,200 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 rose 100-150 yuan/mt WoW today. The domestic 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 17,900-18,400 yuan/mt. Positive signals continue to be released from the macro environment both domestically and internationally, and the improvement trend in orders for downstream casting alloy processing on the demand side is expected to continue, providing ongoing support for aluminum scrap prices. However, two major risks require vigilance: first, against the backdrop of high aluminum prices, enterprises mostly adopt an "on-demand purchasing" strategy, reducing raw material inventory hoarding, which may suppress prices; second, the implementation of environmental protection-driven production restriction plans in central China and the potential risk of primary aluminum prices retreating after a rapid rise. If these risks materialize, the aluminum scrap market will face pullback pressure. Overall, the aluminum scrap market will continue to experience a complex tug-of-war between sellers and buyers; market participants are advised to closely track primary aluminum price trends, changes in downstream demand, and developments in environmental protection policy.

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 was down by 50 yuan/mt to 21,350 yuan/mt. Against the backdrop of aluminum prices pulling back from highs, market quotations diverged: some enterprises quickly followed with a 100 yuan/mt decrease, while others maintained their quotes, adopting a wait-and-see approach. Due to intensified price volatility recently, downstream procurement has become more cautious, focusing mainly on restocking for rigid demand. Raw material supply remains tight, procurement costs for secondary aluminum plants stay high, and coupled with support from the supply side, ADC12 prices are expected to remain firm in the short term.

Aluminum Market Summary:Overall, on the macro front, the continued rebound in China's October CPI indicates a mild recovery in domestic consumption and industrial activity, which helps boost consumption expectations for aluminum semis in end-use sectors such as construction, home appliances, and automobiles, providing intrinsic support for aluminum prices. However, the prolonged US government shutdown could severely drag on its Q4 economic growth, increasing uncertainty in the global economic outlook. From a fundamental perspective, entering November 2025, winter environmental protection restrictions are expected to affect the operating rates of individual enterprises, but considering that aluminum production cannot immediately drop to zero shortly after pot shutdowns, the change in production is expected to be relatively small. Regarding the proportion of liquid aluminum, some enterprises reported that downstream end-user demand is expected to weaken next month, and the proportion of liquid aluminum is expected to pull back, particularly in the second half of November, where expectations for a pullback have strengthened. Currently, aluminum prices are fluctuating at highs, and coupled with the issuance of environmental protection-driven production restriction policies in central China due to severe smog, demand is somewhat suppressed. According to SMM statistics, domestic aluminum ingot inventory in mainstream consumption areas recorded 627,000 mt this Monday, an inventory buildup of 5,000 mt WoW. SMM expects the domestic aluminum ingot inventory trend to turn to stable with a slight increase in the first half of November, operating around 600,000-650,000 mt. Overall, although the fundamental drivers are limited, the macro front remains optimistic both domestically and overseas, and aluminum prices continue to fluctuate at highs.

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