Tug-of-War Between Longs and Shorts Intensifies, SHFE Aluminum Expected to Mainly Fluctuate at Highs in the Short Term [SMM Aluminum Morning Meeting Minutes]

SMM Morning Meeting Minutes for 11.24

Futures: The most-traded SHFE aluminum contract opened higher during the night session on November 21 before entering a consolidation phase. The 2501 contract opened at 21,305 yuan/mt, quickly surged but then encountered resistance, moving into a sideways consolidation pattern. It reached a high of 21,395 yuan/mt and a low of 21,300 yuan/mt, ultimately closing the night session at 21,390 yuan/mt. The subsequent pullback after the rally reflected a lack of sustainability in the bulls' upward push, with significant selling pressure above. From the moving average system, the 5-day moving average crossed below the 10-day moving average, indicating short-term downward pressure; the 20-day moving average serves as a strong medium-term resistance level. In the short term, SHFE aluminum is expected to enter a high-level consolidation phase. In the previous trading session, LME aluminum opened at $2,803/mt, reached a high of $2,812/mt, then fluctuated and pulled back to a low of $2,773/mt, closing at $2,808/mt, up 0.05% from the previous close. Trading volume was 23,600 lots, and open interest decreased by 4,534 lots to 695,000 lots.

Macro Front: Foreign institutions generally predict that the Chinese economy will maintain steady growth next year with policy support. Morgan Stanley believes that, with moderate easing policies, gradual rebalancing, and measured "anti-involution" measures, China's economy will experience mild growth in 2026. Goldman Sachs has raised its forecasts for China's export growth rate and real GDP growth rate. (Bullish ★) US Treasury Secretary Besant stated on Sunday that the 43-day government shutdown caused a permanent loss of $11 billion to the US economy, but he remains optimistic about next year's growth prospects due to lower interest rates and tax cuts. (Neutral)

Fundamentals: Inventory side, according to SMM statistics, domestic primary aluminum ingot inventory in mainstream consumption areas recorded 613,000 mt today, destocking 8,000 mt WoW from last Thursday and destocking 33,000 mt WoW from last Monday.

Primary Aluminum Market: The trading center of the SHFE aluminum December contract fell to around 21,320 yuan/mt. In east China, aluminum ingot destocking was noticeable mid-week, coupled with a decline in futures prices, sellers' offers were mainly at small premiums. As the weekend approached, downstream users made just-in-time procurement, and spot transactions were moderate. However, amid the declining trend, market purchasing became more cautious, with actual transactions mainly maintained at parity to a premium of 10 yuan/mt against the SMM average price, without further strengthening. Today, the east China market selling sentiment index was 3.11, flat MoM; the purchasing sentiment index was 3.10, up 0.01 MoM. SMM A00 aluminum was quoted at 21,380 yuan/mt, down 190 yuan/mt from the previous trading day, at parity against the December contract, up 10 yuan/mt from the previous trading day. Last Friday, trading in the central China market was relatively sluggish. Before the market opened, transaction prices were higher, suppliers with hedging positions had significant selling volume, and with the settlement date approaching, selling sentiment improved noticeably. There was a tendency to lower premiums and discounts to boost trading volume, but influenced by factors such as the upcoming signing of year-end long-term contracts, large players still held prices firm. However, downstream factories showed low purchase willingness, with transaction prices around a discount of 10 yuan against the central China price, which dragged down buying sentiment among purchasing traders. The actual transaction prices in the central China market eventually ranged from a discount of 10 yuan to a premium of 20 yuan against the central China price. Today, the selling sentiment index in the central China market was 2.96, up 0.02 MoM; the purchasing sentiment index was 2.94, down 0.05 MoM. SMM's central China price closed at 21,290 yuan/mt, down 190 yuan/mt from the previous trading day, at a discount of 90 yuan/mt against the December contract, up 10 yuan/mt from the previous trading day, while the Henan-Shanghai price spread was -90 yuan/mt, flat from the previous trading day.

Recycled Aluminum Raw Materials:Last Friday, spot primary aluminum prices dropped slightly compared to the previous trading day, with the SMM A00 spot price closing at 21,380 yuan/mt, and the aluminum scrap market followed the decline overall. Entering late November, downstream demand showed significant divergence: demand for scrap used in cast aluminum alloys remained robust, 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. Last Friday, baled UBC was quoted in a concentrated range of 16,000–16,500 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was quoted in a concentrated range of 18,000–18,500 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 all fell 100 yuan/mt MoM. 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 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 in the market may intensify, and willingness to follow price increases in some regions may weaken. 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 and procurement strategy adjustments of downstream enterprises.

Secondary Aluminum Alloy:Affected by macro headwinds, the nonferrous sector was generally under pressure. The SMM A00 aluminum spot price fell 190 yuan/mt to 21,380 yuan/mt, while the ADC12 price dropped 100 yuan/mt to 21,350 yuan/mt, narrowing the inversion gap with the A00 aluminum price. This week, aluminum scrap prices pulled back overall following aluminum prices, driving down ADC12 raw material costs, but tight supply limited the decline. Additionally, some traders held back sales, putting pressure on secondary aluminum plants' procurement and supporting ADC12's price resistance. Overall, ADC12 prices have limited downside room due to cost and supply support, but falling aluminum prices and cautious demand in the short term restrain rebound momentum. ADC12 prices are expected to move sideways in the range of 21,200–21,500 yuan/mt in the near term. On imports, current overseas ADC12 quotation ranges adjusted down to $2,600–2,630/mt, with immediate import losses widening to around 500 yuan/mt, and the import window remains closed.

Aluminum Market Summary:Overall, on the macro front, the US Fed's monetary policy shows divergence, and the probability of an interest rate cut in December is expected to drop significantly, with overseas macro sentiment turning cautious. Earlier, the suppression of aluminum prices on consumption has led to some demand being postponed, providing some support to prices from the fundamental side; overseas, the progress of production cuts at the Icelandic aluminum plant remains a key focus. Aluminum prices are expected to hover at highs in the short term.

[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 their own independent judgment. Any decisions made by clients are unrelated to SMM.]