Buying Sentiment Warms Up, Aluminum Ingot Destocking in Mid-Week, SHFE Aluminum Expected to Hover at Highs in the Short Term [SMM Aluminum Morning Meeting Minutes]

SMM Aluminum Morning Conference Minutes, 11.20

Futures:During the night session on November 19, the most-traded SHFE aluminum contract opened at 21,620 yuan/mt, reached a highest price of 21,635 yuan/mt and a lowest price of 21,515 yuan/mt, and finally closed at 21,530 yuan/mt, down 0.18%. The night session was mainly characterized by fluctuating downward movement. Technically, the daily candlestick remained near the middle Bollinger Band; the MACD daily candlestick showed expanding green bars; the RSI 14 indicator hovered around 50. In the short term, SHFE aluminum is expected to enter a phase of high-level consolidation. Considering the latest high and low points (the monthly low near 21,160, the high near 22,160), resistance is anticipated in the 21,800-22,000 range, while support is seen in the 21,200-21,400 range.

Macro Front:The US Fed released the minutes from its October monetary policy meeting, revealing significant divergence among policymakers regarding a potential interest rate cut in December. "Many" officials deemed it appropriate to keep rates unchanged, while some argued that a rate cut in December would be reasonable if the economy meets expectations. According to CME FedWatch, the probability of the Fed maintaining unchanged rates in December is 67.2%, with only a 32.8% chance of a 25-basis-point cut. (Bearish ★) US authorities canceled the October non-farm payrolls report and rescheduled the November report for release on December 16, meaning the Fed will lack the latest non-farm payrolls data reference during its December policy meeting. (Neutral ★) Zhang Guoqing, Member of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, conducted surveys from the 16th to the 19th in Guizhou and Chongqing focusing on the digital and intelligent transformation and upgrading of the manufacturing industry and innovation-driven development of state-owned enterprises. He emphasized the need to accelerate the digital and intelligent transformation of manufacturing, solidly promote innovation-driven development in state-owned enterprises, persist in simultaneously optimizing and upgrading traditional industries, cultivating and expanding emerging industries, and making forward-looking layouts for future industries, and develop new quality productive forces according to local conditions. (Bullish ★)

Fundamentals:On Thursday, national aluminum ingot inventory totaled 621,000 mt, indicating a destocking of 25,000 mt compared to Monday.Cost side, the average cost for the aluminum industry recorded on Wednesday was 16,085 yuan/mt, down 1 yuan/mt MoM, while the average industry profit expanded by 91 yuan/mt to 5,465 yuan/mt. Supply and demand side, as aluminum prices declined, purchasing sentiment among downstream enterprises for aluminum recovered, processing fees for aluminum products improved, and demand saw a slight rebound. However, the market overall is still gradually transitioning into the off-season. Casting ingot volume increased MoM, posing a risk of inventory buildup in aluminum during the off-season.

Primary Aluminum Market:The SHFE aluminum 12 contract retreated after a rapid rise, reaching a high of 21,585 yuan/mt. In East China, while the absolute price saw a slight rebound, overall levels remained lower than previous periods. Purchasing sentiment recovered, downstream restocking willingness improved, and holders attempted to support premiums and discounts. Actual transactions were mainly around parity to a premium of 10 yuan/mt against the SMM average price. On Wednesday, the selling sentiment index in the east China market was 3.11, up 0.01 WoW, while the purchasing sentiment index was 3.06, up 0.05 WoW. SMM A00 aluminum closed at 21,550 yuan/mt on Wednesday, up 90 yuan/mt from the previous trading day, at a discount of 20 yuan/mt against the December contract, an increase of 10 yuan/mt from the previous trading day. Downstream enterprises' restocking sentiment for raw materials rebounded significantly, driving a noticeable recovery in trading sentiment among traders in the central China market. Prices at the night session continued to decline, suppliers' willingness to hold prices firm and sell increased, SHFE aluminum prices rose after the opening, trading volume in the central China market decreased, and the momentum of premiums and discounts gradually weakened. Final transaction prices ranged from a premium of 10 yuan to 20 yuan against the central China price. On Wednesday, the selling sentiment index in the central China market was 2.93, up 0.01 WoW, while the purchasing sentiment index was 2.98, up 0.03 WoW. SMM central China closed at 21,450 yuan/mt, up 110 yuan/mt from the previous trading day, at a discount of 120 yuan/mt against the December contract, an increase of 30 yuan/mt from the previous trading day, with the Henan-Shanghai price spread at -100 yuan/mt, up 20 yuan/mt from the previous trading day.

Recycled Aluminum Raw Materials:On Wednesday, spot primary aluminum prices rebounded slightly from the previous trading day, with SMM A00 spot closing at 21,550 yuan/mt, while regional disparities in aluminum scrap market quotations were evident. 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 Wednesday, baled UBC was quoted in a range of 16,300-16,800 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was quoted in a 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 hub, mechanical casting aluminum scrap, and aluminum shavings remained flat WoW. By region, wait-and-see sentiment was strong in Jiangxi, Hunan, Hubei, and Guizhou, where quotations remained unchanged, while east China and central China followed aluminum prices, choosing to raise prices by 50-100 yuan/mt on the day. 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 17,800-18,600 yuan/mt. Supply side, the tight supply-demand pattern in the aluminum scrap market is difficult to change in the short term, but as primary aluminum prices fluctuate at highs, fear of high prices remains prevalent. Overall, the market will continue the tug-of-war between sellers and buyers at highs, and it is recommended to closely track primary aluminum price trends, changes in environmental protection policies, and adjustments in downstream enterprises' procurement strategies, while remaining vigilant against high-price correction risks.

Secondary Aluminum Alloy:On Wednesday, aluminum prices recovered slightly, with SMM A00 aluminum spot prices rising 90 yuan/mt to 21,550 yuan/mt. Secondary aluminum side, ADC12 prices held steady at 21,450 yuan/mt, with overall trading sentiment remaining weak and market participants showing limited willingness to follow the upward trend. However, driven by tight aluminum scrap supply, prices in some regions or for certain varieties rose actively, while cost-side pressure persisted and enterprise raw material inventories remained low. In the short term, ADC12 prices may fluctuate rangebound, as the tight supply of aluminum scrap is unlikely to ease, providing solid cost support. Demand-side resilience persists, and just-in-time procurement will lend bottom support to prices.

Aluminum Market Summary:Overall, macro front news is mixed. 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 season to the off-season, though demand has not yet shown significant weakening. Inventory side, aluminum faces the risk of off-season inventory buildup, but after aluminum prices pulled back, market buying sentiment improved, leading to mid-week destocking of aluminum ingots. Overall, earlier macro tailwinds and capital inflows drove aluminum prices higher, but current absolute prices have pulled back to around 21,500 yuan/mt. Domestic fundamentals lack sufficient momentum to support a sustained rally in aluminum prices, yet the pace of demand weakening is slower than previously expected. Subsequently, aluminum prices are expected to hover 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 in their decisions and not use this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]