US Fed Risk Warnings and Interest Rate Cut Expectations Intertwined, Aluminum Market Maintains High-Level Consolidation [SMM Aluminum Morning Meeting Minutes]

SMM Morning Meeting Minutes, 12.2

Futures:During the night session on December 1, the most-traded SHFE aluminum 2601 contract opened at 21,870 yuan/mt, reached a highest price of 21,940 yuan/mt, a lowest price of 21,820 yuan/mt, and finally closed at 21,885 yuan/mt, up 0.09%. From a technical perspective, the MA moving averages showed a differentiated arrangement (MA5: 21,724.00 > MA10: 21,601.50 < MA20: 21,534.25 < MA40: 21,618.50), while the MACD 4-hour K-line level continued to show red bars, indicating a golden cross state (DIFF: 51.23, DEA: 5.48). Regarding open interest, the night session open interest was approximately 263,000 lots, showing a decrease compared to the daytime session. In terms of trend, the SHFE aluminum 2601 contract is temporarily within a high-level consolidation channel; combined with recent highs and lows, the resistance level is expected to be in the 21,940-22,000 range, and the support level is expected to be in the 21,800-21,850 range. LME aluminum opened at $2,877.5/mt, reached a high of $2,896/mt, a low of $2,866/mt, and finally closed at $2,888/mt, up 0.8%. Trading volume was 21,700 lots, an increase of 2,083 lots, while open interest was 700,000 lots, a decrease of 1,602 lots.

Macro Front:The US Fed stated that, due to concerns over "high interest rates, tightening underwriting standards, and declining commercial real estate values," it is closely monitoring the investment portfolios of community and regional banks, as these factors could affect borrowers' ability to refinance or repay loans. (Bearish ★) A survey released on Monday by the Institute for Supply Management (ISM) showed that the US Manufacturing Purchasing Managers' Index (PMI) for November fell to 48.2 from 48.7 in October. A reading below 50 indicates contraction in the manufacturing sector, which accounts for 10.1% of the US economy. (Bearish ★)

Fundamentals:According to SMM statistics, domestic aluminum ingot warehouse withdrawals totaled 141,500 mt during November 24-30, an increase of 2,100 mt compared to the previous week; domestic aluminum billet warehouse withdrawals totaled 50,500 mt during the same period, a decrease of 2,800 mt compared to the previous week. According to SMM data, the average tax-inclusive full cost for China's aluminum industry in November 2025 was 16,057 yuan/mt, up 1.1% MoM but down 21% YoY. The main reasons were that the monthly average price of alumina fell less than expected during the period, but as the dry season approaches, electricity costs have increased significantly in provinces with a high proportion of hydropower, coupled with rising prebaked anode prices, leading to a MoM increase in the total cost of aluminum.

Primary Aluminum Market:In the morning session, the SHFE aluminum December contract mainly moved with volatility, but its price center increased significantly compared to the previous trading day. In East China, holders maintained active selling but still showed some intention to hold prices firm, with offers ranging from a discount of 10 yuan/mt to around the SMM average price; as the absolute price strengthened, downstream purchase intention was reflected in an expansion of discounts, with offers ranging from a discount of 20 yuan/mt to a discount of 10 yuan/mt against the SMM average price. Overall, the actual transaction price on Monday was at a discount of 10 yuan/mt against the SMM average price. The market sentiment index for selling in east China on Monday was 2.83, down 0.02 MoM; the purchasing sentiment index was 2.70, down 0.05 MoM. SMM A00 aluminum closed at 21,730 yuan/mt, up 2,800 yuan/mt from the previous trading day, at a discount of 50 yuan/mt against the December contract, down 10 yuan/mt from the previous trading day. On Monday, aluminum prices saw a significant correction, with buyers in the central China market showing low willingness to transact and preferring large discounts. After the opening, prices continued to rise, and holders were in a wait-and-see mode, gradually increasing their quotes, but the market remained mainly inactive. After 9:30, major players entered the market to purchase in large volumes, leading to a decrease in spot inventory, and quotes showed a premium trend. Ultimately, the actual transaction price mainly ranged from a discount of 20 yuan/mt to a premium of 10 yuan/mt against the central China price. The market sentiment index for selling in the central China market on Monday was 2.96, up 0.02 MoM; the purchasing sentiment index was 2.81, down 0.01 MoM. SMM central China closed at 21,600 yuan/mt, up 270 yuan/mt from the previous trading day, at a discount of 180 yuan/mt against the December contract, down 20 yuan/mt from the previous trading day, with the price spread between Henan and Shanghai at -130 yuan/mt, down 10 yuan/mt from the previous trading day.

Recycled aluminum raw materials:On Monday, the spot primary aluminum price rose significantly compared to the previous trading day, with SMM A00 spot closing at 21,730 yuan/mt, and the aluminum scrap market followed suit. Entering December, the demand for aluminum scrap downstream has become clearly divided, with the demand for casting series aluminum alloys remaining stable and showing a slight increase, providing more support for consumption. Some enterprises in Shandong reported that the raw material procurement market was characterized by high prices and low availability, with tight supply being the main theme, and procurement prices remaining high. On Monday, the concentrated quotes for baled UBC were 16,200-16,700 yuan/mt (excluding tax), and for shredded aluminum tense scrap (priced based on aluminum content) were 18,200-18,700 yuan/mt (excluding tax). The prices for baled UBC, clean tapping aluminum wire, mixed aluminum extrusion scrap free of paint, mechanical casting aluminum scrap, scrap motorcycle wheel, and mixed aluminum tense scrap increased by 200 yuan/mt MoM. Due to the continuous rise in SHFE aluminum futures prices, regions such as Jiangxi, Hubei, Foshan, Anhui, and Hunan collectively raised their aluminum scrap quotes, with a cumulative increase of 200 yuan/mt. It is expected that the aluminum scrap market will continue to fluctuate at highs this week, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) at 18,000-18,500 yuan/mt (excluding tax). The tight supply situation is unlikely to change in the short term, with constraints still present in both the recycling and import sectors, limiting downside room. Fluctuations in primary aluminum prices remain the core influencing factor, coupled with intensified environmental protection measures and transportation restrictions at year-end, leading to a cautious market sentiment. The tug-of-war between sellers and buyers continues, and it is necessary to closely monitor the trends in primary aluminum, environmental protection policies, and import supplements, while being vigilant about the risk of high-level fluctuations.

Secondary Aluminum Alloy: On Monday, the most-traded cast aluminum alloy futures contract 2601 opened at 20,800 yuan/mt, reached a high of 21,085 yuan/mt, and closed at 20,995 yuan/mt by midday, up 45 yuan/mt or 0.21% from the previous close. Trading volume was 1,838 lots, and open interest was 3,809 lots, with bears mainly reducing their positions. Driven by macro tailwinds, aluminum prices rose sharply on Monday. The SMM spot A00 aluminum price was quoted at 21,730 yuan/mt, a single-day increase of 280 yuan/mt; the ADC12 price also increased by 150 yuan/mt to 21,500 yuan/mt. Concurrently, as copper prices approached the 90,000 yuan mark, prices for aluminum scrap, especially aluminum tense scrap, followed the upward trend, leading to a significant rise on the cost side. Furthermore, the premium for ADC12 relative to alloys with higher copper content, such as A380, widened further. The rapid price surge currently dampens downstream willingness to pick up goods, but end-users' push for annual targets at year-end continues to support orders for secondary aluminum enterprises. Overall, the ongoing release of year-end demand push and the front-loading of orders driven by policy, combined with strong support from high raw material costs, suggest that secondary aluminum alloy prices are expected to hold up well in the short term, highlighting overall price resilience. On the import side, the current overseas ADC12 quotation range is $2,600–2,630/mt. Due to the rapid price increase domestically, the immediate import loss has narrowed to around 400 yuan/mt.

Aluminum Market Summary: On the macro front, sentiment both domestically and overseas is favorable. Expectations have increased that Trump will nominate a dove as Fed Chairman, boosting market optimism for a December interest rate cut. Meanwhile, the US ISM Manufacturing PMI fell to 48.2 in November, remaining below the 50 mark, which may further strengthen market expectations for a Fed rate cut. Foreign institutions generally predict that the Chinese economy will maintain steady growth next year with policy support, enhancing market confidence. Fundamentally, in terms of supply, domestic operating aluminum capacity saw limited fluctuation. By the end of November, SMM statistics showed domestic existing aluminum capacity was approximately 45.87 million mt, with operating aluminum capacity around 44.225 million mt. The pace of capacity release showed no significant deviation, providing stable support for market supply. Demand side, the suppressive effect of previously high aluminum prices on consumption is gradually easing, with some delayed demand starting to be released. Last week, the weekly operating rate for leading domestic aluminum processing enterprises increased slightly by 0.3 percentage points WoW to 62.3%. Sub-sectors including aluminum extrusion, aluminum wire and cable, and both primary and secondary aluminum alloy segments showed varying degrees of recovery in operating performance, reflecting a gradual repair in downstream consumption demand. Overall, recent aluminum prices have been buoyed by macro sentiment, while marginal improvements in the fundamental supply-demand pattern have also provided substantive support for prices. Based on this, SMM expects that aluminum prices will continue to fluctuate at highs in the short term. [The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should exercise caution in their decision-making and not use this to replace their own independent judgment. Any decisions made by clients are unrelated to SMM.]