Macro and Fundamentals Resonate, Aluminum Prices Hold Up Well [SMM Aluminum Morning Meeting Minutes]

SMM Morning Meeting Minutes for 11.27

Futures:During the night session on November 26, the SHFE aluminum 2601 contract opened at 21,600 yuan/mt, hit a high of 21,610 yuan/mt, touched a low of 21,515 yuan/mt, and finally closed at 21,565 yuan/mt, up 0.51%. In terms of open interest, the night session open interest was approximately 259,000 lots, showing minor fluctuations compared to the daytime session, with no significant increase or decrease. From the perspective of the moving average system, prices during the night session consistently traded above the 5-day and 10-day moving averages, forming strong support below. LME aluminum opened at $2,805/mt, reached a high of $2,869.5/mt, a low of $2,804/mt, and finally closed at $2,864/mt, up 2.25%. Trading volume was 27,400 lots, an increase of 9,245 lots, while open interest was 691,000 lots, a decrease of 2,087 lots.

Macro Front:The Ministry of Industry and Information Technology (MIIT) and five other departments issued the "Implementation Plan on Enhancing the Supply-Demand Adaptability of Consumer Goods to Further Promote Consumption." The plan points out that by 2027, the supply structure of consumer goods will be significantly optimized, forming three trillion-yuan level consumption sectors and ten hundred-billion-yuan level consumption hot topics, and creating a batch of high-quality consumer goods rich in cultural connotation and renowned globally. (Bullish ★) Influenced by dovish remarks from New York Fed President Williams, J.P. Morgan now expects the US Fed to cut interest rates by 25 basis points each in December and January next year. The current market probability expectation for a 25-basis-point rate cut in December has risen to 84.7%. (Bullish ★)

Fundamentals:Inventory side, according to SMM statistics, domestic primary aluminum ingot inventory in mainstream consumption areas recorded 596,000 mt this Wednesday, a destocking of 17,000 mt compared to Monday, and a destocking of 25,000 mt WoW.

Primary Aluminum Market:The SHFE aluminum December contract mainly traded with volatility. In East China, holders were mostly selling, with the off-season atmosphere gradually intensifying. Downstream buyers mainly made just-in-time procurement. The actual transaction price for cargoes with invoices dated this month was mostly at parity to a discount of around 10 yuan/mt against the SMM average price, while prices for cargoes with invoices dated next month were mainly at a discount of 10 yuan/mt against the SMM average price. The selling sentiment index in the East China market this Wednesday was 2.97, down 0.05 WoW; the purchasing sentiment index was 2.88, down 0.07 WoW. On November 26, SMM A00 aluminum was quoted at 21,400 yuan/mt, down 40 yuan/mt from the previous trading day, at a discount of 20 yuan/mt against the December contract, down 10 yuan/mt from the previous trading day. Recently, downstream consumption weakened, and enterprises' purchase willingness was not high. Market transactions in Central China continued to be sluggish. As year-end long-term contracts are about to be signed, holders' willingness to hold prices firm increased, and transaction prices were relatively stable. Ultimately, the market transaction price was mainly at parity with the Central China price, hovering between a premium of 10 yuan/mt and a discount of 10 yuan/mt against the Central China price. On Wednesday, the sales sentiment index in the central China market was 2.95, flat MoM; the purchasing sentiment index was 2.87, down 0.03 MoM. The SMM A00 aluminum spot price in central China closed at 21,290 yuan/mt, down 40 yuan/mt from the previous trading day, at a discount of 130 yuan/mt against the December contract, down 10 yuan/mt from the previous day. The price spread between Henan and Shanghai was -110 yuan/mt, unchanged from the previous trading day.

Recycled Aluminum Raw Materials:On Wednesday, the spot price of primary aluminum saw a narrow correction compared to the previous trading day, with the SMM A00 spot price closing at 21,400 yuan/mt, and the aluminum scrap market followed the decline 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 Wednesday, baled UBC was quoted in a range of 16,000-16,500 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 in Hubei, Anhui, Hunan, Guizhou, and Sichuan held steady MoM, while prices in Shanghai, Zhejiang, Tianjin, Jiangsu, and other regions fell by 25-100 yuan/mt MoM. In terms of the price difference between primary aluminum and scrap, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 2,434 yuan/mt, and the price difference between A00 aluminum and bare bright aluminum wire in Jiangsu was 867.5 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 balance 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 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 the trend of primary aluminum prices and adjustments in procurement strategies of downstream enterprises.

Secondary Aluminum Alloy:On Wednesday, the most-traded aluminum alloy futures contract, al2601, opened at 20,660 yuan/mt and maintained a narrow, range-bound fluctuation pattern throughout the day, mainly oscillating around 20,600 yuan/mt. By the midday close, the futures price settled at 20,690 yuan/mt, up 35 yuan/mt or 0.17% from the previous trading day, with the movement primarily driven by short covering. In the spot market, the SMM A00 aluminum spot price was adjusted down by 40 yuan/mt to 21,400 on Wednesday, while the ADC12 price held steady at 21,350 yuan/mt. This week, the aluminum price fluctuation range narrowed, and the overall trading atmosphere remained stable. Supported by the push for annual targets at year-end and the order front-loading effect brought by policy adjustments, demand in the secondary aluminum market remained resilient. Coupled with persistently high raw material costs, secondary aluminum alloy prices continued their firm trend and are expected to maintain a narrow, fluctuating trend in the short term. Import side, the current overseas ADC12 quotation range continues at $2,600–2,630/mt, with import losses widening to around 500 yuan/mt, and the import window remains closed.

Aluminum market summary:Overall, on the macro front, domestic and overseas macro factors lean positive, dovish voices within the US Fed resurface, and expectations for US Fed interest rate cuts heat up. Earlier aluminum price suppression on consumption has delayed some demand, providing some support to prices from the fundamentals; overseas, focus remains on the progress of production cuts at the Iceland aluminum plant. Aluminum prices are expected to fluctuate 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.]