SHFE Aluminum Pulls Back Further, Spot Cargo Trading Sentiment Gradually Improves [SMM Aluminum Morning Meeting Minutes]

SMM Aluminum Morning Meeting Minutes, 11.18

Futures: In the night session on November 17, the most-traded SHFE aluminum contract opened at 21,665 yuan/mt, reached a highest price of 21,690 yuan/mt and a lowest price of 21,570 yuan/mt, and finally closed at 21,625 yuan/mt, down 0.46%. The night session mainly showed volatile movement, with the price center hovering around 21,600 yuan/mt. From a technical perspective, SHFE aluminum open interest further decreased to over 720,000 lots. According to the Bollinger Bands indicator, the daily candlestick has not yet pulled back to the middle band; the MACD daily candlestick's red bars turned to negative territory, indicating a slight downward trend in prices. Considering the latest high and low points (the monthly low near 21,160, the high near 22,160), resistance is expected in the 21,800-22,000 range, and support in the 21,200-21,400 range.

Macro Front:The EU stated that the eurozone economy is expected to maintain mild growth, with projected GDP growth rates of 1.2% and 1.4% for the next two years, respectively. (Bullish ★) US Fed Governor Waller believes the Fed should cut interest rates by another 25 basis points at the December meeting, citing weakness in the US labour market and the drag of tight monetary policy on the economy, particularly affecting middle- and low-income consumers; US Fed Vice Chair Jefferson noted that downside risks to employment have increased, but as interest rates are approaching neutral levels, the Fed needs to be more cautious in its decision-making. (Neutral ★) Ministry of Finance data showed that national general public budget revenue in October was 2.26 trillion yuan, up 3.2% YoY; revenue from January to October increased 0.8% YoY; among which, the securities transaction stamp tax was 162.9 billion yuan, up 88.1% YoY. (Bullish ★)

Fundamentals:Inventory side, national aluminum ingot inventory recorded 646,000 mt on Monday, with an inventory buildup of 25,000 mt WoW. Cost side, the average cost in the aluminum industry recorded 16,090 yuan/mt on Monday, flat MoM, while the average industry profit narrowed by 280 yuan/mt to 5,540 yuan/mt. Supply and demand side, last week's surge in aluminum prices suppressed downstream cargo pick-up demand; total aluminum ingot warehouse withdrawals last week recorded 114,100 mt, down 4,200 mt WoW; domestic supply and demand saw no significant changes on Monday this week.

Primary Aluminum Market:The SHFE aluminum December contract mainly experienced volatile adjustments in the early session, trading overall between approximately 21,620 yuan/mt and 21,720 yuan/mt. In east China, the absolute price declined compared to the previous period, leading to a slight rebound in procurement sentiment. Trading volume increased WoW compared to last Thursday and Friday, but overall transactions remained relatively cautious, with downstream processors mainly making just-in-time procurement. Actual transactions ranged from a discount of 10 yuan/mt to a premium of 10 yuan/mt against the SMM average price. The east China market selling sentiment index was 3.08 on Monday this week, flat WoW; the buying sentiment index was 2.91, up 0.04 WoW. On Monday, SMM A00 aluminum was quoted at 21,630 yuan/mt, down 280 yuan/mt from the previous trading day, at parity against the November contract and at a discount of 30 yuan/mt against the December contract, unchanged from the previous trading day. On Monday, trading in the central China market recovered slightly; as prices fell, restocking sentiment among downstream enterprises improved. Before market opening, trading volume was low amid strong wait-and-see sentiment, with prices mainly at parity with the central China price. After opening, as futures prices fell again, traders' sentiment toward premiums and discounts turned bullish, and stockpiling sentiment rebounded. Actual transaction prices eventually ranged from parity to a premium of 20 yuan/mt against the central China price. On Monday, the selling sentiment index in the central China market was 2.92, up 0.01 MoM; the purchasing sentiment index was 2.93, up 0.13 MoM. SMM central China aluminum closed at 21,490 yuan/mt, down 270 yuan/mt from the previous trading day, at a discount of 140 yuan/mt against the November contract and 170 yuan/mt against the December contract, up 10 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -140 yuan/mt, up 10 yuan/mt from the previous trading day.

Recycled Aluminum Raw Materials: On Monday, spot primary aluminum prices cooled rapidly compared with the previous trading day, with SMM A00 aluminum closing at 21,630 yuan/mt, while aluminum scrap prices generally followed the decline. Entering mid-November, 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. On Monday, baled UBC was quoted in a concentrated range of 16,400–16,900 yuan/mt (ex-tax); shredded aluminum tense scrap (priced based on aluminum content) was quoted in a concentrated range of 17,800–18,300 yuan/mt (ex-tax). Baled UBC, clean tapping aluminum wire, shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, mechanical casting aluminum scrap, and aluminum shavings fell by 200 yuan/mt MoM. In Jiangxi, Hunan, Hubei, Henan, and other regions, prices were first lowered by 100 yuan/mt on Saturday following the futures market decline, and were further reduced by 100 yuan/mt on Monday, resulting in a cumulative decline of 200 yuan/mt, fully reflecting the downward trend. This week, the aluminum scrap market is expected to continue fluctuating at highs, with the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) likely moving between 17,800 and 18,600 yuan/mt. Supply side, the tight supply-demand pattern in the aluminum scrap market is unlikely to change in the short term. However, as primary aluminum prices remain high, fear of high prices persists in the market. Overall, the market will continue to see a tug-of-war between sellers and buyers at high levels. It is advisable to closely monitor primary aluminum price trends, changes in environmental protection policies, and adjustments in downstream enterprises' procurement strategies, while remaining cautious of potential corrections at high levels.

Secondary Aluminum Alloy: On Monday, aluminum prices experienced a significant correction, with the SMM A00 aluminum spot price falling by 280 yuan/mt to 21,920 yuan/mt. In the secondary aluminum market, ADC12 prices also decreased by 100 yuan/mt to 21,550 yuan/mt. On Monday, secondary aluminum enterprises adopted a cautious approach to price adjustments, with most choosing to lower their offers by 100 yuan/mt in line with market trends, while a minority maintained a bullish outlook and kept their prices stable for the time being. Approaching year-end, overall market demand remained optimistic, but short-term fluctuations in aluminum prices intensified, fueling downstream fear of high prices and slowing down the procurement pace. Overall, ADC12 prices are expected to fluctuate rangebound in the near term, with cost support remaining relatively solid. The tight supply of aluminum scrap is unlikely to ease in the short term, and raw material prices are more likely to rise than fall. Demand side shows some resilience, coupled with low industry inventory, just-in-time procurement is expected to provide a floor for prices.

Aluminum Market Summary:Overall, the macro front presents a mix of bullish and bearish factors, but the general atmosphere is favorable. Fundamentally, market sentiment continues to focus on production cuts at overseas aluminum plants in Iceland and Mozambique, with expectations for tighter overseas supply; however, domestically, the market is gradually transitioning from the peak demand season to the off-season, though demand has not yet shown a significant decline. Inventory side, it is expected to enter a phase of fluctuation in the short term. Overall, driven by macro tailwinds and capital flows, aluminum prices surged, but domestic fundamentals lack sufficient momentum to support a sustained rally. Aluminum prices are expected to pull back slightly before fluctuating at highs.

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