Aluminum Prices Decline with Slight Rebound in Downstream Demand, Short-Term Aluminum Prices Expected to Hover at Highs [SMM Aluminum Morning Meeting Minutes]

SMM Aluminum Morning Meeting Minutes, 11.19

Futures: During the night session on November 18, the most-traded SHFE aluminum contract opened at 21,485 yuan/mt, reached a highest price of 21,560 yuan/mt and a lowest price of 21,435 yuan/mt, and finally closed at 21,510 yuan/mt, up 0.05%. The night session mainly showed fluctuating operations, with the center hovering around 21,510 yuan/mt. From a technical perspective, SHFE aluminum open interest shrank to over 679,000 lots; according to the Bollinger Bands indicator, the daily candlestick pulled back below the middle band; on the daily candlestick MACD, the green bars expanded, and prices are expected to shift into fluctuations in the short term. Combined with the latest highs and lows (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: According to data released by ADP Research, private sector employers cut an average of 2,500 jobs per week in the four weeks ending November 1. (Neutral ★) On November 18, the Beijing Branch of the People's Bank of China and 11 other departments issued the "Implementation Plan for Financial Support to Boost and Expand Consumption in Beijing," aiming to support the construction of an international consumption center city, strengthen financial supply for commodity and service consumption in Beijing, better meet financial service needs in the consumption sector, and promote vigorous consumption boosting. (Bullish ★) On November 18, the National Financial Regulatory Administration held a symposium with foreign-funded financial institutions in Haikou. Li Yunze, Party Secretary and Director of the National Financial Regulatory Administration, stated that efforts will be made to create a market-oriented, law-based, and international business environment, promote more financial reform and opening-up measures to be piloted in Hainan first, and fully support making Hainan Free Trade Port an important gateway leading China's opening-up in the new era. (Bullish ★)

Fundamentals: Inventory side, total aluminum ingot inventory in major consumption areas was 492,500 mt on Tuesday, with an inventory buildup of 1,500 mt WoW. Cost side, the average cost in the primary aluminum industry recorded 16,086 yuan/mt on Tuesday, down 4 yuan/mt WoW, and the average industry profit narrowed by 166 yuan/mt to 5,374 yuan/mt. Supply and demand side, as aluminum prices fell, purchasing sentiment among downstream enterprises for primary aluminum recovered, processing fees for aluminum products improved, and demand saw a slight rebound. However, the overall market is still gradually transitioning into the off-season, and there is a risk of inventory buildup in the primary aluminum sector during the off-season.

Primary Aluminum Market: The most-traded SHFE aluminum December contract mainly fluctuated downward during the morning session, with the operating center lowering to around 21,450 yuan/mt. In east China, as the absolute price fell further, purchasing sentiment further rebounded, but downstream wait-and-see sentiment increased, and large-scale restocking behavior has not yet emerged. Actual transactions were mainly around parity with the SMM average price. This Tuesday, the selling sentiment index in the east China market was 3.1, up 0.02 WoW; the purchasing sentiment index was 3.01, up 0.1 WoW. The SMM A00 aluminum price was reported at 21,460 yuan/mt, down 170 yuan/mt from the previous trading day, at a discount of 30 yuan/mt against the December contract, flat from the previous trading day. As aluminum prices retreated, both supply and buying sentiment in the central China market improved significantly on Tuesday, with slight restocking demand from downstream enterprises driving transactions in the trader market. However, as aluminum prices fell below the monthly average, suppliers showed a clear willingness to hold prices firm, resulting in actual transaction prices ranging from a premium of 10 yuan/mt to 20 yuan/mt over the central China price. On Tuesday, the supply sentiment index in the central China market was 2.92, flat WoW, while the buying sentiment index was 2.95, up 0.02 WoW. The SMM central China price closed at 21,340 yuan/mt, down 150 yuan/mt from the previous trading day, at a discount of 150 yuan/mt against the December contract, up 20 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -120 yuan/mt, up 20 yuan/mt from the previous trading day.

Recycled Aluminum Raw Materials:On Tuesday, spot primary aluminum prices continued to decline compared to the previous trading day, with the SMM A00 spot price closing at 21,460 yuan/mt, while aluminum scrap prices generally followed the downward trend. Entering mid-November, downstream demand showed clear divergence: demand for scrap used in cast aluminum alloys remained robust, providing solid consumption support, while demand for scrap used in wrought aluminum alloys began to show signs of weakening. Nevertheless, tight market supply remained the dominant theme, keeping procurement prices elevated. On Tuesday, baled UBC was quoted in a concentrated range of 16,300–16,800 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was quoted in a concentrated range of 18,000–18,500 yuan/mt (ex-tax). Prices for baled UBC, clean tapping aluminum wire, shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hubs, mechanical casting aluminum scrap, and aluminum shavings fell by 100 yuan/mt WoW. Prices in Jiangxi, Hunan, Hubei, and Guizhou dropped by 100 yuan/mt, while prices in Henan fell by 200 yuan/mt on Tuesday, catching up with the decline. The aluminum scrap market is expected to hover at highs this week, with the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) likely fluctuating between 17,800 and 18,600 yuan/mt. Supply side, the tight supply-demand balance in the aluminum scrap market is unlikely to change in the short term. However, as primary aluminum prices fluctuate at highs, fear of high prices remains prevalent. Overall, the market will continue to experience 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 procurement strategies, while remaining cautious of potential corrections at highs.

Secondary Aluminum Alloy:On Tuesday, aluminum prices continued to fluctuate downward, with the SMM A00 aluminum spot price falling 170 yuan/mt to 21,460 yuan/mt. In the secondary aluminum market, the ADC12 price dropped another 100 yuan/mt to 21,450 yuan/mt. Price adjustments were somewhat divergent: some enterprises lowered their offers in response to the continued weakness in aluminum prices, while others, constrained by difficulties in raw material procurement and cost pressures, kept prices temporarily stable, with a strong wait-and-see sentiment prevailing. Overall, ADC12 prices are expected to fluctuate rangebound in the short term, with cost support remaining relatively solid. The tight supply of aluminum scrap is unlikely to ease in the near term, and raw material prices are more likely to rise than fall. Demand side, there is a certain degree of resilience, coupled with low industry inventory, just-in-time procurement will provide a floor for prices.

Aluminum Market Summary:Overall, the macro front is favorable. Fundamentally, market sentiment continues to focus on production cuts at aluminum plants in Iceland and Mozambique, with expectations of tightening overseas supply. However, domestically, the market is gradually transitioning from the peak season to the off-season, though demand has not yet significantly weakened. Inventory side, aluminum faces the risk of inventory buildup during the off-season. Overall, driven by previous macro tailwinds and capital flows, aluminum prices surged, but domestic fundamentals lack sufficient momentum to support a continued rally. Prices have pulled back to around 21,500 yuan/mt and are expected to hover at highs going forward.

[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.]