The US Fed's internal "dovish voices" reemerge, fundamental factors support SHFE aluminum in stabilizing and rebounding from a decline [SMM Aluminum Weekly Price Review]

SMM November 27 News:

Macro Perspective, overseas, dovish voices reemerged within the US Fed, boosting market expectations for US Fed interest rate cuts. 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. Fed Governor Waller said he advocates for a rate cut in December and indicated that September's employment data might be revised downward. Influenced by dovish comments from New York Fed President Williams, JPMorgan now expects the Fed to cut rates by 25 basis points each in December and January next year; the market's probability expectation for a 25-basis-point cut in December has risen to 84.7%. Domestically, foreign institutions generally predict that China's 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 grow mildly in 2026. Goldman Sachs raised its forecasts for China's export growth and real GDP growth. The MIIT and five other ministries issued the "Implementation Plan on Enhancing the Supply-Demand Adaptability of Consumer Goods to Further Promote Consumption." The plan states 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 globally renowned.

Fundamentals, aluminum supply both domestically and overseas showed no abnormalities this week. Cost side, aluminum real-time cost remained basically stable WoW; affected by aluminum prices retreating from highs, the aluminum real-time theoretical profit fell 107 yuan/mt WoW to 5,381 yuan/mt, though the impact on aluminum smelters' high-profit structure remains relatively limited. Demand side, the operating rate of leading domestic aluminum processing enterprises increased slightly by 0.3% WoW to 62.3%, with improvements seen in the operating performance of the aluminum extrusion, aluminum wire and cable, primary and secondary aluminum alloy sectors to varying degrees. The domestic aluminum extrusion industry's operating rate recorded 52.5% this week, up 0.4 percentage points WoW, but regional performance diverged. The proportion of liquid aluminum declined for the third consecutive week, with the SMM weekly proportion of liquid aluminum recording 76.86%, down 0.4 percentage points WoW, slightly increasing aluminum ingot supply pressure. However, the pullback in aluminum prices received positive feedback; domestic aluminum ingot and billet warehouse withdrawals increased by 20% and 13% WoW respectively, driving domestic aluminum ingot inventory below 600,000 mt. According to SMM statistics, on November 27, aluminum ingot inventory in mainstream domestic consumption areas was 596,000 mt, down 17,000 mt from Monday and down 25,000 mt from last Thursday. SMM expected it to pull back to around 580,000 mt by month-end, with the destocking trend likely to continue into early December.

Overall, on the macro front, sentiment both domestically and overseas tilted positive, with renewed dovish voices within the US Fed boosting expectations for US Fed interest rate cuts. Foreign institutions widely predicted that China's economy would maintain steady growth next year with policy support, bolstering market confidence. On the fundamentals side, earlier high aluminum prices had suppressed consumption, delaying some demand. This week, the weekly operating rate of leading domestic aluminum processing enterprises edged up 0.3% WoW to 62.3%, with improvements seen in the operating rates of aluminum extrusion, aluminum wire and cable, and both primary and secondary aluminum alloy segments. The proportion of liquid aluminum declined for the third consecutive week, slightly increasing supply pressure for aluminum ingots. However, the recent pullback in aluminum prices from highs generated positive feedback; warehouse withdrawals for aluminum ingots and billets in China increased by 20% and 13% WoW respectively over the past week, driving down domestic aluminum ingot inventory to below 600,000 mt. SMM expected it to pull back to around 580,000 mt by month-end, with the destocking trend likely to continue into early December. Overall, fundamentals provided some support for prices, but recent aluminum price movements were primarily driven by macro sentiment. Overseas, the progress of production cuts at the Icelandic aluminum plant remained a key focus. The pattern of aluminum prices fluctuating at highs is expected to persist in the short term, with SHFE aluminum forecast to trade between 21,250 and 21,750 yuan/mt and LME aluminum between $2,770 and $2,880/mt next week.

》Order to View SMM Metal Spot Historical Prices