Expectations for Interest Rate Cuts Heat Up Combined with Demand Resilience, SHFE Aluminum and LME Aluminum Strengthen Simultaneously [SMM Aluminum Morning Meeting Minutes]

December 4 SMM Morning Meeting Minutes

Futures:During the night session on December 3, the most-traded SHFE aluminum contract 2601 opened at 21,935 yuan/mt, reached a high of 22,055 yuan/mt, touched a low of 21,930 yuan/mt, and finally closed at 22,010 yuan/mt, up 70 yuan/mt or 0.32% from the previous close. Technically, the MA moving averages showed a differentiated arrangement (MA5: 21,917.00 > MA10: 21,782.00 > MA20: 21,615.50 < MA40: 21,664.5), while the MACD 4-hour K-line continued to show a red bar, indicating a golden cross state (DIFF: 103.48, DEA: 53.92). In terms of open interest, the night session open interest was approximately 250,000 lots, an increase from the daytime session. LME aluminum opened at $2,869.5/mt, hit a high of $2,903.5/mt, touched a low of $2,865/mt, and finally closed at $2,897/mt, up 1.17%. Trading volume was 26,000 lots, an increase of 6,253 lots, while open interest was 701,000 lots, a decrease of 218 lots.

Macro Front:US Treasury Secretary Besant stated that certain areas of the US economy have shown signs of weakness, necessitating an interest rate cut. (Bullish ★) US: November ADP employment decreased by 32,000, the lowest level since March 2023, compared with an estimated increase of 5,000 and a previous increase of 42,000. (Bullish ★)

Fundamentals:Inventory side, this Thursday, inventory of aluminum ingots in major domestic consumption areas recorded 596,000 mt, flat WoW and flat from this Monday. According to SMM, one aluminum producer offered its first CIF Japan main ports aluminum ingot premium for Q1 2026 at $190/mt, up from the Q4 2024 offer. In terms of industry growth momentum, global ESS battery cell production is entering a period of rapid growth: production reached 363 GWh in 2024, is projected to climb to 540 GWh in 2025, up 48.8% YoY; even with a larger base, the growth rate in 2026 is expected to remain at a relatively high level of 35.2%, with global ESS battery cell production expected to reach 730 GWh by then.

Primary Aluminum Market:In the morning session, the SHFE aluminum December contract mainly fluctuated upward. In east China, market trading remained sluggish, with high absolute prices leading to poor downstream buying sentiment; some traders were optimistic about future aluminum prices, controlling shipments, with shipment sentiment slightly rebounding. This Wednesday, actual transaction prices were at a discount of 10 yuan/mt to parity against the SMM average price. This Wednesday, the shipment sentiment index in the east China market was 2.82, up 0.01 WoW; the purchase sentiment index was 2.69, flat WoW. SMM A00 aluminum was quoted at 21,800 yuan/mt, up 90 yuan/mt from the previous trading day, at a discount of 50 yuan/mt against the December contract, flat from the previous trading day.

Recycled Aluminum Raw Materials:This Wednesday, trading activity in the central China market recovered. Downstream enterprises were bullish on aluminum prices, leading to a rebound in purchasing sentiment, which prompted traders to make substantial purchases. However, due to the high absolute price of spot aluminum, the increase in premiums and discounts was relatively small. Market circulation of spot cargo was limited, and buyers preferred to purchase at large discounts, while holders held prices firm and were reluctant to sell. Ultimately, the actual transaction prices hovered between a discount of 10 yuan/mt to the central China price and a premium of 20 yuan/mt to the central China price. This Wednesday, the selling sentiment index in the central China market was 2.96, up 0.01 WoW; the purchasing sentiment index was 2.85, up 0.03 WoW. The SMM central China price closed at 21,680 yuan/mt, up 100 yuan/mt from the previous trading day, at a discount of 170 yuan/mt against the December contract, up 10 yuan/mt from the previous trading day. The Henan-Shanghai price spread was -120 yuan/mt, up 10 yuan/mt from the previous trading day. This Wednesday, the spot price of primary aluminum increased compared to the previous trading day, with the SMM A00 spot price closing at 21,800 yuan/mt, while 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. Furthermore, some scrap-consuming enterprises in Shandong reported that raw material procurement was characterized by nominal prices without actual transactions, with tight market supply remaining the main theme, keeping purchase prices high. This Wednesday, the concentrated offer price for baled UBC was 16,300-16,800 yuan/mt (ex-tax), and for shredded aluminum tense scrap (priced based on aluminum content) was 18,200-18,700 yuan/mt (ex-tax). The price for baled UBC increased by 50 yuan/mt WoW, while prices for clean tapping aluminum wire, mixed aluminum extrusion scrap free of paint, mechanical casting aluminum scrap, scrap motorcycle wheel, and mixed aluminum tense scrap remained flat WoW. This Wednesday, many regions including Jiangxi, Anhui, Hubei, Foshan, Henan, and Guizhou chose to hold steady and adopt a wait-and-see approach, without adjusting prices. Regarding 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 closed at 2,501 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap closed at 1,749 yuan/mt. 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 difficult to change in the short term, as constraints from the recycling end and import end persist, limiting the downside room. Fluctuations in primary aluminum prices remain the core influencing factor. Coupled with intensified year-end environmental protection crackdowns and transportation restrictions, market sentiment is relatively cautious. Overall, the tug-of-war between sellers and buyers continues, requiring close tracking of primary aluminum trends, environmental protection policies, and import supplements, while remaining vigilant against high volatility risks.

Secondary Aluminum Alloy:This Wednesday, the most-traded cast aluminum alloy futures contract 2602 opened at 21,145 yuan/mt, reached a high of 21,190 yuan/mt, a low of 21,030 yuan/mt, and finally closed at 21,145 yuan/mt, up 50 yuan/mt from the previous close, a gain of 0.24%. The trading volume was 3,997 lots, and the open interest was 15,983 lots, with the increase mainly driven by bulls. On Wednesday, aluminum prices edged up slightly, with the SMM A00 aluminum spot price rising by 90 yuan/mt to 21,800 yuan/mt, while the ADC12 price held steady at 21,500 yuan/mt, widening the price inversion between the two. Recent strength in aluminum prices has boosted aluminum scrap traders' willingness to sell, improving market liquidity, but elevated prices continue to provide support on the cost side. Demand side presents a mixed picture: while year-end rush to deliver orders from end-users lends resilience to the market, high prices are dampening downstream procurement, coupled with seasonal demand softening, which may constrain consumption. In December, supply side is unlikely to see significant increases due to raw material constraints, and low industry inventory continues to underpin prices. Overall, ADC12 prices have limited downside room, but a breakthrough to the upside would require further cost-driven increases or stronger-than-expected demand releases. In the near term, prices are expected to fluctuate at highs in a narrow range, with close attention on the pace of aluminum scrap supply improvements, actual policy implementation, and changes in downstream enterprises' procurement pace. On the import front, overseas ADC12 quotations currently range between $2,600–2,630/mt, with immediate import losses holding around 400 yuan/mt.

Aluminum Market Summary:On the macro front, sentiment both domestically and overseas has turned favorable, as markets await key US economic data ahead of the US Fed's policy meeting next week. Recent data indicating a gradual cooling of the US economy, along with dovish signals from Fed policymakers, has strengthened expectations for a 25-basis-point interest rate cut at next week's meeting, with traders pricing in an 89% probability. Foreign institutions widely predict that China's economy will maintain steady growth next year with policy support, boosting market confidence. On the fundamentals, supply side, some new aluminum projects are expected to start pots between the end of 2025 and early 2026, and operating aluminum capacity is forecast to increase slightly in December MoM. Demand side, although December falls into the traditional consumption off-season and overall downstream consumption sentiment has weakened, a sharp decline has not materialized, highlighting continued demand resilience. Operating data show that last week, operating rates for aluminum extrusion, aluminum wire and cable, and both primary and secondary aluminum alloy segments improved to varying degrees, with the overall operating rate rising 0.4 percentage points WoW to 62.3%. Inventory side, entering early December, warehouse withdrawals slowed due to aluminum prices hitting secondary highs, limiting downside room for inventory. Overall, recent aluminum price gains have been buoyed by macro sentiment, while marginal improvements in the supply-demand pattern—limited supply increases coupled with resilient demand—have also provided substantive support. Based on this, SMM expects aluminum prices to maintain their pattern of fluctuating at highs in the near term.

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