Macro Tailwinds Counter Off-Season Pressure, SHFE Aluminum Breaks Through 22,000 Mark [SMM Aluminum Morning Meeting Minutes]

SMM Aluminum Morning Conference Minutes, 11.13

Futures:Technically, the SHFE aluminum 2601 contract extended gains in yesterday's night session, closing at 21,950 yuan/mt, up 0.85%, showing strong performance. The moving average system displayed a bullish alignment, with MA5 to MA60 (21,945-21,949) highly converged and prices stabilizing above, forming solid short-term support. The MACD indicator strengthened further, with DIF (0.4995) crossing above DEA (-0.1300) to form a golden cross, and the histogram expanding into positive territory to 1.2591, indicating strengthening upward momentum. Overall, prices successfully broke through the previous day's resistance, and the short-term technical structure is bullish. Near-term key support is expected in the 21,860-21,950 range, with resistance eyed at 22,000-22,300. The overall market holds up well, with attention on the test of key resistance levels.

Macro Front:"Fed Whisperer" Nick Timiraos noted that four regional Fed presidents with voting rights were not enthusiastic about another interest rate cut in December. Boston Fed President Collins stated the Fed is likely to keep rates at current levels for some time. The labour market has not deteriorated, and the Fed needs to ensure inflation sustainably returns to 2% before cutting rates. (Neutral★) Chinese Vice Premier He Lifeng met with leaders of the National Committee on US-China Relations, stating that both sides should jointly maintain and implement the important consensuses and outcomes of the leaders' meeting, and promote stable development of China-US economic and trade relations. (Bullish★) The US House of Representatives will vote on a temporary funding bill on Wednesday evening EST, meaning the longest federal government shutdown crisis in US history, now in its 43rd day, is expected to end. The White House press secretary said this shutdown could reduce Q4 economic growth by two percentage points, and the October CPI and employment reports "may never be released." (Neutral★)

Fundamentals:According to SMM statistics, the industry's proportion of liquid aluminum rebounded 1.4 percentage points MoM to 77.7% this month. Demand side, entering November, the industry is in a transition period between peak and off-seasons, coupled with persistently high aluminum prices, downstream procurement is mainly for rigid demand. Extrusion enterprises generally reported reduced orders on hand, and operating rates showed a pullback trend. Last week, the domestic aluminum extrusion weekly operating rate recorded 52.6%, down 0.9 percentage points WoW. Operating performances in other downstream sectors also showed varying degrees of weakness. According to SMM, domestic electrolytic aluminum ingot inventory in mainstream consumption areas recorded 621,000 mt this Thursday, destocking 6,000 mt from this Monday. SMM expects domestic aluminum ingot inventory to operate around 600,000-650,000 mt in the first half of November.

Primary Aluminum Market:SHFE aluminum mainly fluctuated with adjustments in the early session, trading around 21,680 yuan/mt. East China, approaching contract rollover, suppliers mainly held prices firm and were reluctant to sell, shipments decreased, coupled with large players entering the market to purchase, actual transactions maintained parity to a premium of 10 yuan/mt against the SMM average price. The shipment sentiment index in the East China market on Wednesday was 3.05, up 0.03 WoW; the purchase sentiment index was 2.97, up 0.08 WoW. On Wednesday, SMM A00 aluminum closed at 21,670 yuan/mt, up 50 yuan/mt from the previous trading day, at a discount of 10 yuan/mt against the November contract, up 10 yuan/mt from the previous trading day. In the central China market on Wednesday, suppliers' willingness to sell at high prices increased, but downstream maintained just-in-time procurement, the purchase market cooled, resulting in low trading volume. Pre-market, suppliers tended to sell at parity or a premium; after the futures prices opened higher, most negotiated transactions were at a discount. Actual transaction prices in the market ranged from a discount of 10 yuan to a premium of 10 yuan against the central China price. SMM central China closed at 21,550 yuan/mt, up 40 yuan/mt from the previous trading day, at a discount of 130 yuan/mt against the November contract, flat from the previous trading day; the price difference between Henan and Shanghai was -120 yuan/mt, down 10 yuan/mt from the previous trading day.

Recycled Aluminum Raw Materials:On Wednesday, spot primary aluminum prices edged up slightly compared to the previous trading day, with SMM A00 spot aluminum closing at 21,670 yuan/mt; aluminum scrap market prices followed the aluminum price higher with slight increases. The traditional peak season has ended, downstream demand diverged significantly: demand for scrap used in cast aluminum alloys remained stable, providing 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, purchase prices stayed high, but the sustainability of high levels needs to be considered. On Wednesday, baled UBC was quoted at 16,450-16,950 yuan/mt (ex-tax), shredded aluminum tense scrap (priced based on aluminum content) was quoted at 17,900-18,550 yuan/mt (ex-tax). Baled UBC prices rose 100 yuan/mt WoW; clean tapping aluminum wire, shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, mechanical casting aluminum scrap, and aluminum shavings prices rose 25-150 yuan/mt WoW on Wednesday. With the rise in spot aluminum prices on Wednesday, aluminum scrap prices in Hunan, Anhui, Hubei, Jiangxi, and other regions followed with increases of 100-200 yuan/mt, while prices in Shanghai, Zhejiang, Jiangsu, Tianjin, and other regions mainly held steady or increased 25-50 yuan/mt. Regarding the price difference between A00 aluminum and aluminum scrap, the price difference for mechanical casting aluminum scrap in Shanghai widened by 50 yuan/mt from the previous trading day to 2,932 yuan/mt; the price difference for mixed aluminum extrusion scrap free of paint in Foshan widened by 40 yuan/mt from the previous trading day to 2,449 yuan/mt. The 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 17,900-18,400 yuan/mt. The macro environment at home and abroad continues to release positive signals, and the improvement trend in orders for downstream cast alloy processing is expected to continue, providing sustained support for aluminum scrap prices. However, two risks require vigilance: first, amid high aluminum prices, enterprises mostly make just-in-time procurement and reduce 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 its complex tug-of-war between sellers and buyers in the future. Market participants are advised to closely track primary aluminum price trends, changes in downstream demand, and developments in environmental protection policies.

Secondary Aluminum Alloy:This Wednesday, SMM A00 aluminum spot prices rose by 50 yuan/mt to 21,670 yuan/mt; in the secondary aluminum market, ADC12 prices held steady at 21,500 yuan/mt. Aluminum prices edged up this Wednesday, while secondary aluminum market prices remained stable temporarily. The tight supply of aluminum scrap persists, coupled with prices of auxiliary materials like copper fluctuating at highs, providing strong support from the cost side. ADC12 prices still have upward momentum in the short term. Although end-use consumption resilience underpins demand, aluminum prices are at highs, leading to cautious procurement by downstream players. In the short term, ADC12 prices are expected to hold up well. Subsequent focus should be on improvements in aluminum scrap supply, the implementation effects of relevant policies, and changes in the procurement pace of downstream enterprises.

Aluminum Market Summary:High-level interactions between China and the US released positive signals, with both sides committed to stabilizing economic and trade relations, which helps improve the external demand environment and market risk appetite for the aluminum market. On the other hand, the longest US government shutdown crisis in history is expected to be resolved, avoiding further impact on economic activity and metal demand from political gridlock and easing market concerns. From a fundamental perspective, entering November 2025, winter environmental protection restrictions are expected to affect operations at individual enterprises. However, considering that aluminum production cannot immediately drop to zero shortly after pot shutdowns, the production change is expected to be relatively small. Currently, aluminum prices are fluctuating at highs, coupled with severe smog in central China leading to the rollout of environmental protection-driven production restriction policies, which somewhat suppresses demand. Overall, positive macro-level signals have strengthened market optimism regarding the aluminum market's fundamentals. Hopes for improved domestic and external demand jointly constitute short-to-medium-term upward drivers for aluminum prices. However, the emergence of off-season characteristics in demand and marginal inventory accumulation will limit the upside room for aluminum prices. The pattern of aluminum prices fluctuating at highs is unlikely to change in the short term.

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