Expectations for US Fed Interest Rate Cuts Heat Up, SHFE Aluminum Continues to Hover at Highs [SMM Aluminum Morning Meeting Minutes]

12.3 SMM Morning Meeting Summary

Futures: During the night session on December 2, the most-traded SHFE aluminum 2601 contract opened at 21,940 yuan/mt, reaching a high of 21,955 yuan/mt and a low of 21,825 yuan/mt, closing at 21,840 yuan/mt, down 70 yuan/mt from the previous close, with a decline of 0.32%. From a technical analysis perspective, the MA lines showed a divergent pattern (MA5:21,856.00 > MA10:21,689.00 > MA20:21,573.00 < MA40:21,638.88). The MACD 4-hour candlestick chart continued to show red bars, in a golden cross state (DIFF:76.01, DEA:29.70). In terms of open interest, it was approximately 255,000 lots during the night session, a decrease from the daytime session. LME aluminum opened at $2,885/mt, reached a high of $2,904.5/mt, a low of $2,850.5/mt, and closed at $2,863.5/mt, with a decline of 0.85%. Trading volume was 19,700 lots, a decrease of 1,971 lots, and open interest was 701,000 lots, an increase of 370 lots.

Macro front: Zheng Shanjie, Director of the National Development and Reform Commission (NDRC), published a signed article titled "Deeply Study and Implement the Spirit of the Fourth Plenary Session of the 20th CPC Central Committee, Write a New Chapter of Chinese-Style Modernization with New Achievements of High-Quality Development" in the Party Building magazine. The article states that strengthening the domestic large cycle and smoothing the dual circulation of domestic and international markets is key. It emphasizes building a strong domestic market and accelerating the construction of a new development pattern. By adhering to the strategic base point of expanding domestic demand, vigorously boosting consumption, increasing effective investment, and resolutely removing obstacles to the construction of a unified national market, it aims to promote efficient connectivity between the domestic and international markets, using the domestic large cycle to better lead the international cycle. (Bullish ★) The National Energy Administration released data showing that in October 2025, there were 5,358 newly registered new energy power generation projects (excluding household PV) nationwide, including 18 wind power projects, 5,336 photovoltaic power projects (19 centralized photovoltaic power projects and 5,317 industrial and commercial distributed photovoltaic power projects), and 4 biomass power projects. (Bullish ★)

Fundamentals: According to SMM statistics, on December 2, 2025, the combined inventory of aluminum billet in Guangdong and Wuxi stood at 83,500 mt, with 25,500 mt in Guangdong and 58,000 mt in Wuxi, unchanged from the previous period. A southern aluminum billet enterprise reduced its production by about one-third in November due to switching to aluminum busbar production, mainly because the overall aluminum billet market was weak this year, with low profits. The company plans to shift its focus to other non-ferrous metal businesses, and it is expected that the reduced production level will be maintained in December.

Primary aluminum market: In the morning session, the SHFE aluminum 12 contract hit bottom and then rebounded, with the center slightly lower than the previous trading day. In east China, market trading was relatively sluggish, with the absolute price rising from previous levels and downstream buying sentiment remaining weak. Spot discounts widened, and traders' selling sentiment also weakened. On Tuesday, actual transaction prices were at a discount of 10 yuan/mt to parity against the SMM average price. On Tuesday, the selling sentiment index in the east China market was 2.81, down 0.02 WoW, while the buying sentiment index was 2.69, down 0.01 WoW. SMM A00 aluminum closed at 21,710 yuan/mt, down 20 yuan/mt from the previous trading day, at a discount of 50 yuan/mt against the December contract, flat from the previous trading day. In central China, buying sentiment rebounded slightly on Tuesday. Traders preferred to deliver long-term contracts at large discounts, but holders showed strong willingness to hold prices firm and were reluctant to sell. Some large enterprises held prices firm at a premium of 20 yuan/mt against the central China price. With aluminum prices high, downstream purchasing was lukewarm, and market transactions were weak. Ultimately, actual transaction prices ranged from a discount of 20 yuan/mt to a premium of 20 yuan/mt against the central China price. On Tuesday, the selling sentiment index in the central China market was 2.95, down 0.01 WoW, while the buying sentiment index was 2.82, up 0.01 WoW. SMM central China closed at 21,580 yuan/mt, down 20 yuan/mt from the previous trading day, at a discount of 180 yuan/mt against the December contract, flat from the previous trading day. The price spread between Henan and Shanghai was -130 yuan/mt, flat from the previous trading day.

Recycled Aluminum Raw Materials: On Tuesday, spot primary aluminum prices fluctuated rangebound compared to the previous trading day, with SMM A00 spot closing at 21,710 yuan/mt. The aluminum scrap market held steady collectively. Entering December, 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. Some scrap-consuming enterprises in Shandong reported that raw material procurement was characterized by "price without market," with tight supply remaining the main theme, keeping procurement prices high. On Tuesday, baled UBC was concentratedly quoted at 16,250-16,750 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was concentratedly quoted at 18,200-18,700 yuan/mt (ex-tax). Baled UBC increased by 50 yuan/mt WoW, catching up with the upward trend, while clean tapping aluminum wire, mixed aluminum extrusion scrap free of paint, mechanical casting aluminum scrap, scrap motorcycle wheel, and mixed aluminum tense scrap prices held flat WoW. The aluminum scrap market is expected to continue fluctuating 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 (ex-tax). The tight supply situation is unlikely to change in the short term, as constraints from the recycling end and imports persist, limiting downside room. Primary aluminum price fluctuations remain the core influencing factor, coupled with intensified year-end environmental protection crackdowns and transportation restrictions, keeping market sentiment cautious. Overall, the tug-of-war between sellers and buyers continues, requiring close monitoring of primary aluminum trends, environmental protection policies, and import supplements, while remaining vigilant against high volatility risks.

Secondary Aluminum Alloy: On Tuesday, the most-traded cast aluminum alloy futures contract 2602 opened at 21,130 yuan/mt, reached a high of 21,195 yuan/mt, a low of 21,000 yuan/mt, and finally closed at 21,095 yuan/mt, down 15 yuan/mt from the previous close, a decrease of 0.07%. Trading volume was 5,751 lots, and open interest was 15,759 lots, with bears mainly increasing positions. On Tuesday, aluminum prices adjusted within a narrow range; the SMM A00 aluminum spot price fell by 20 yuan/mt to 21,710 yuan/mt, while the ADC12 price held steady at 21,500 yuan/mt. Recently, aluminum scrap traders' willingness to sell increased slightly, and market liquidity improved, but overall supply remained relatively tight, providing support on the cost side. Demand side presented a mixed picture: on one hand, year-end rush to deliver orders from end-users would lend resilience to the market; on the other hand, high prices' dampening effect on downstream procurement, coupled with seasonal demand softening, may limit consumption strength. Supply side, constrained by raw materials, struggled to expand significantly, and low industry inventory provided a floor for prices. Overall, ADC12 prices have limited downside room, but an upward breakthrough would require further cost-side increases or stronger-than-expected demand release. In the short term, prices are expected to fluctuate narrowly at high levels, with close attention on the pace of aluminum scrap supply improvement, actual policy implementation, and changes in downstream enterprises' procurement pace. On imports, the current overseas ADC12 quotation range is $2,600–2,630/mt, with immediate import losses maintained around 400 yuan/mt.

Aluminum Market Summary: Macro front, domestic and overseas macro sentiment leaned positive, as markets awaited key US economic data ahead of the US Fed's policy meeting next week. Recent data indicated a gradual cooling of the US economy, and dovish signals from Fed policymakers strengthened market expectations for a 25-basis-point interest rate cut at next week's meeting, with traders pricing in an 89% probability of a cut. Foreign institutions widely projected that China's economy would maintain steady growth next year with policy support, boosting market confidence. Fundamentally, supply side, some new aluminum projects are expected to start pots and energize from the end of 2025 to early 2026, and operating aluminum capacity in December is forecast to increase slightly MoM. Demand side, although December falls in the traditional consumption off-season and overall downstream consumption atmosphere weakened, a sharp decline did not occur, and demand resilience remained evident. Based on operating rate data, operating rates for aluminum extrusion, aluminum wire and cable, and both primary and secondary aluminum alloy segments improved to varying degrees last week, with the overall operating rate rising 0.4 percentage points WoW to 62.3%. Inventory side, entering early December, warehouse withdrawal pace slowed due to aluminum prices hitting highs again, limiting downside room for inventory; moreover, current inventory is at a relatively high level compared to the same period in the past three years, creating significant inventory pressure on the market. Overall, recent aluminum prices were buoyed by macro sentiment, while marginal improvement in the supply-demand pattern—limited supply growth and resilient demand—also provided substantial 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.]