US Fed Dovish Tone Resurfaces, Aluminum Prices Continue to Fluctuate at Highs [SMM Aluminum Morning Meeting Minutes]

11.26 SMM Morning Meeting Summary

Futures: On the night of November 25, the SHFE aluminum 2601 contract opened at 21,465 yuan/mt, with a highest price of 21,520 yuan/mt and a lowest price of 21,385 yuan/mt, finally closing at 21,410 yuan/mt, showing a fluctuate rangebound pattern. Trading volume was 69,300 lots, down by 43,800 lots, and open interest was 269,000 lots. Although the price opened slightly higher, it failed to break through the previous resistance level of 21,555 yuan/mt, instead pulling back after an initial rise, indicating that selling pressure still exists, and the overall price remained within the 21,350-21,500 yuan/mt range. LME aluminum opened at $2,807/mt, reached a high of $2,828/mt, and a low of $2,791/mt, finally closing at $2,801/mt, down 0.43%. Trading volume was 18,100 lots, and open interest was 693,000 lots, down by 2,282 lots. LME aluminum showed a fluctuate upward but encounter resistance pattern.

Macro front: Mary Daly, President of the Federal Reserve Bank of San Francisco, recently stated that she supports cutting interest rate next month, as she believes the risk of a sudden deterioration in the job market is greater and more difficult to control than a sudden rise in inflation. (Bullish ★) At the regular press conference of the Ministry of Foreign Affairs on November 25, a reporter asked about the outcome of the Sino-US presidential call on the 24th. Spokesperson Mao Ning responded that the call, initiated by the US side, was positive, friendly, and constructive. The two presidents had in-depth communication on issues of mutual concern, injecting significant meaning into the stable development of Sino-US relations. (Bullish ★)

Fundamentals: In terms of inventory, according to SMM statistics, the combined inventory of aluminum ingots in three domestic locations on November 25 was 459,500 mt, down by 1,500 mt from the previous period; while the combined inventory of aluminum billets in two locations was 88,000 mt, down by 2,000 mt from the previous period.

Primary aluminum market: The SHFE aluminum December contract mainly fluctuated upward during the morning session. In east China, sellers initially quoted around the SMM average, but with concentrated supply and ample market liquidity, buyers preferred to transact at a discount, with actual transaction prices around 10 yuan/mt below the SMM average. As the futures continued to rise, the discount widened. On Tuesday, the east China market's selling sentiment index was 3.02, down 0.07 MoM; the buying sentiment index was 2.95, down 0.11 MoM. SMM A00 aluminum was quoted at 21,440 yuan/mt, up 80 yuan/mt from the previous trading day, at a discount of 10 yuan/mt against the December contract, down 10 yuan/mt from the previous trading day. On Tuesday, the central China market saw continued weak trading, with traders mainly offloading single-sided positions. Downstream enterprises showed low purchase willingness, making it difficult for traders to hold prices firm, and quotes continued to decline. The final actual transaction prices consistently fell from the opening, ranging from parity to a 20 yuan/mt discount against the central China price. On Tuesday this week, the shipment sentiment index in the central China market was 2.95, down 0.02 WoW; the purchase sentiment index was 2.90, down 0.02 WoW. SMM central China closed at 21,330 yuan/mt, up 70 yuan/mt from the previous trading day, at a discount of 120 yuan/mt against the Dec contract, down 20 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -110 yuan/mt, down 10 yuan/mt from the previous trading day.

Recycled aluminum raw materials:On Tuesday this week, spot primary aluminum prices fluctuated and rose compared to the previous trading day. SMM A00 spot closed at 21,440 yuan/mt, and the aluminum scrap market followed the increase collectively. Entering late November, downstream demand for aluminum scrap showed significant divergence. Demand for scrap used in cast aluminum alloys remained robust with a slight increase, providing more support for consumption, and some scrap-consuming enterprises in Shandong reported that raw material procurement was characterized by nominal prices without actual transactions. 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 Tuesday this week, baled UBC was quoted in a range of 16,050-16,550 yuan/mt (ex-tax), shredded aluminum tense scrap (priced based on aluminum content) was quoted in a range of 18,000-18,500 yuan/mt (ex-tax). Prices in Hubei, Anhui, Hunan, Guizhou, and Sichuan held steady WoW, while prices in Shanghai, Zhejiang, Tianjin, Jiangsu, and other regions rose by 50-100 yuan/mt WoW. In terms of the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 2,501 yuan/mt, and the price difference between A00 aluminum and bare bright aluminum wire in Jiangsu was 880.6 yuan/mt. 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 may intensify, and willingness to follow the price increase 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 adjustments in downstream enterprises' procurement strategies.

Secondary aluminum alloy:On Tuesday this week, the most-traded aluminum alloy futures contract 2601 opened at 20,695 yuan/mt, fluctuated and rose after opening. As of 14:20, the futures closed at 20,735 yuan/mt, up 100 yuan/mt or 0.48% from the previous trading day, mainly driven by short covering. Technically, it is a weak technical rebound within the current bearish trend, but the trend has not reversed yet. If key resistance levels cannot be broken with volume subsequently, prices are likely to return to the downward trend and test support below again. Spot side, aluminum prices edged up narrowly on Tuesday this week. SMM A00 aluminum spot price was reported at 21,440 yuan/mt, up 80 yuan/mt from the previous trading day. In the secondary aluminum market, ADC12 prices held steady at 21,350 yuan/mt. Against the backdrop of rising aluminum prices, the market generally maintained stable offers with strong wait-and-see sentiment, and producers had low willingness to adjust prices. Currently, ADC12 prices are strongly supported at the bottom due to cost support and tight supply; however, constrained by cautious sentiment on the demand side triggered by aluminum price fluctuations, upside room for prices is limited. ADC12 prices are expected to move sideways in the range of 21,200-21,500 yuan/mt in the short term. On the import side, overseas ADC12 quotation range remains flat at 2,600-2,630 $/mt, with immediate import losses above 500 yuan/mt, and the import window remains closed.

Aluminum Market Summary:Overall, on the macro front, domestic macro trends are favorable; the US Fed's monetary policy shows divergence, with dovish voices resurfacing within the Fed, and overseas macro sentiment leans cautious. Previous aluminum price suppression of consumption has delayed some demand, providing some fundamental support for prices; overseas, focus remains on the progress of production cuts at the Icelandic aluminum plant. 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 advice. Clients should make decisions cautiously and not use this to replace independent judgment. Any decisions made by clients are unrelated to SMM.]