Demand has not yet shown significant weakening, and with fundamental support, aluminum prices are expected to fluctuate within a narrow range [SMM Aluminum Morning Meeting Summary]

SMM Morning Meeting Minutes for 11.21

Futures:SMM Aluminum Morning Brief for 11.21:

During the night session on November 20, the most-traded SHFE aluminum contract opened at 21,545 yuan/mt, reached a highest price of 21,650 yuan/mt and a lowest price of 21,540 yuan/mt, and finally closed at 21,550 yuan/mt, down 0.14%. The night session mainly fluctuated downward. Technically, the daily candlestick remained near the middle Bollinger Band; the MACD daily candlestick showed expanding green bars; the RSI 14 indicator stayed around 50. In the short term, SHFE aluminum is expected to enter a high-level consolidation phase. Combined with the latest highs and lows (monthly low of 21,175, high around 22,160), resistance is projected in the 21,800-22,000 range, and support in the 21,200-21,400 range.

Macro Front:The U.S. Bureau of Labor Statistics released the September non-farm payroll report on Thursday, which was originally scheduled for last month. U.S. non-farm payrolls increased by 119,000 in September, with the unemployment rate at 4.4% (Neutral★). According to the People's Daily, China's consumer market maintained steady growth in October, with consumption potential continuing to be released. Specifically, merchandise consumption grew steadily, with retail sales of goods up 2.8%. Sales of trade-in related products maintained rapid growth, and demand for upgraded goods remained robust (Bullish★). From November 18 to 20, He Lifeng, Member of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, conducted surveys in Hubei and Hunan provinces, emphasizing the need to continuously improve the quality and efficiency of foreign trade, enhance the construction of high-standard logistics systems, strengthen support for high-quality development of the manufacturing industry, accelerate the establishment of a unified national market, and further facilitate the dual circulation of domestic and international markets (Bullish★).

Fundamentals:On Thursday, national aluminum ingot inventory totaled 621,000 mt, a destocking of 25,000 mt from Monday.Cost side, the average cost in the aluminum industry recorded 16,081 yuan/mt on Thursday, down 4 yuan/mt MoM, while the average industry profit expanded by 24 yuan/mt to 5,489 yuan/mt. Supply side, as of Thursday, weekly operating capacity for aluminum remained stable, with the proportion of liquid aluminum down 0.2 percentage points to 77.05%. Yesterday, there were reports of an explosion during busbar lifting at a 600KA aluminum pot in a smelter, but the news has not been clearly confirmed. Demand side, off-season characteristics in the aluminum processing industry further deepened, with significant structural divergence across segments amid weakening demand. Aluminum wire and cable stood out as a bright spot, with operating rate edging up to 62.4% supported by power grid orders. Benefiting from a brief boost after the lifting of environmental protection-driven production restrictions in Henan, the operating rate for aluminum plate/sheet and strip slightly rose to 66.0%, while most other segments faced downward pressure.

Primary Aluminum Market:The SHFE aluminum December contract fluctuated, with its price center hovering around 21,500 yuan/mt. In east China, weekly destocking of aluminum ingots gave sellers confidence to hold prices firm. Futures prices did not fall further, and procurement sentiment among end-users rebounded. Although large-scale restocking did not occur, overall trading sentiment recovered, with actual transactions mainly at parity to a premium of 10 yuan/mt against the SMM average price. On Thursday, the east China market selling sentiment index was 3.11, flat WoW; the buying sentiment index was 3.09, up 0.03 WoW. SMM A00 aluminum closed at 21,570 yuan/mt, up 20 yuan/mt from the previous trading day, at a discount of 10 yuan/mt against the December contract, up 10 yuan/mt from the previous trading day. Although aluminum prices saw a slight correction on Thursday, trading sentiment in the downstream market remained favorable. As futures prices rose, premiums and discounts in the central China market adjusted downward. However, with prices below the monthly average, large enterprises showed clear willingness to hold prices firm. Final transaction prices ranged from parity to a premium of 20 yuan/mt against the central China price. On Thursday, the central China market selling sentiment index was 2.94, up 0.01 WoW; the buying sentiment index was 2.99, up 0.01 WoW. SMM central China closed at 21,480 yuan/mt, up 30 yuan/mt from the previous trading day, at a discount of 100 yuan/mt against the December contract, up 20 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -90 yuan/mt, up 10 yuan/mt from the previous trading day.

Recycled Aluminum Raw Materials: On Thursday, spot primary aluminum prices rose slightly from the previous trading day, with SMM A00 aluminum closing at 21,570 yuan/mt, while the aluminum scrap market held steady overall. Entering late 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 Thursday, baled UBC was quoted at 16,200-16,700 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was quoted at 18,000-18,500 yuan/mt (ex-tax). Baled UBC rose 50 yuan/mt WoW, while clean tapping aluminum wire, shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hubs, mechanical casting aluminum scrap, and aluminum shavings held flat WoW. The price difference between A00 aluminum and aluminum scrap showed divergent trends. On November 20, the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai narrowed to 2,113 yuan/mt from 2,119 yuan/mt at the beginning of the week, while the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan widened to 2,584 yuan/mt from 2,506 yuan/mt at the beginning of the week. Next week, the aluminum scrap market is expected to hover at highs, 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 balance in the aluminum scrap market is difficult to change in the short term. However, as primary aluminum prices fluctuate at highs, fear of high prices may intensify, and the willingness to follow price increases in some regions may weaken. Overall, the market will continue the tug-of-war between sellers and buyers at high levels, and it is recommended to closely track primary aluminum price trends and procurement strategy adjustments of downstream enterprises.

Secondary Aluminum Alloy: Aluminum prices edged up slightly this Thursday, with the SMM A00 aluminum spot price quoted at 21,570 yuan/mt, up 20 yuan/mt from the previous day. ADC12 prices held steady at 21,450 yuan/mt, mainly due to limited price fluctuations in raw materials and mediocre market trading, leaving enterprises with little motivation to adjust prices. In the short term, ADC12 may continue to fluctuate narrowly, while tight supply of aluminum scrap persists, keeping cost support firm; demand side remains resilient, with rigid purchases providing a floor for prices.

Aluminum Market Summary: Overall, macro front news was mixed. Fundamentally, market sentiment continues to focus on production cuts at overseas aluminum plants in Iceland and Mozambique, maintaining expectations for tightening overseas supply; however, domestically, the market is gradually transitioning from the peak season to the off-season, though demand has not yet weakened significantly. On the inventory front, aluminum faces the risk of inventory buildup during the off-season, but after aluminum prices pulled back, buying sentiment improved, leading to destocking of aluminum ingots mid-week. In summary, 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 do not provide sufficient momentum for aluminum prices to continue rising sharply, yet the pace of demand weakening is slower than previously expected. Aluminum prices 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 make decisions cautiously and not use this to replace independent judgment. Any decisions made by clients are unrelated to SMM.]