Strong Macro Expectations Continue to Provide Support, Aluminum Prices' High Resilience Faces Test [SMM Aluminum Morning Meeting Minutes]

12.9 SMM Morning Meeting Minutes

Futures:SHFE aluminum 2601 night session closed at 22,120 yuan/mt, down 0.11%, fluctuating rangebound overall. MA5 (22,117) and MA10 (22,113.50) formed short-term support, with the price currently above the moving average system; however, MACD (DIF 2.1396, DEA 1.3982) red bars narrowed, indicating weakened upward momentum. MA5 trading volume was 134 lots, with moderate activity; the core trading range for SHFE aluminum is suggested at 22,000-22,300. LME aluminum closed at $2,886.5/mt, down 0.48%. The price hovered near MA5 ($2,884.20), but MA5-MA60 showed a bearish alignment, and MACD (DIF -0.1825, DEA -0.0926) remained below the zero axis, suggesting enhanced bearish momentum. MA5 trading volume was only 7 lots, indicating low market participation; the core trading range for LME aluminum is suggested at $2,860-2,920.

Macro Front:The Political Bureau of the CPC Central Committee held a meeting to analyze and study economic work for 2026. The meeting emphasized adhering to domestic demand-driven growth, building a strong domestic market; adhering to innovation-driven development, accelerating the cultivation and expansion of new momentum; adhering to the "dual carbon" goals as guidance, promoting comprehensive green transformation; (Bullish★) The US Fed is scheduled to hold its interest rate meeting on December 9 and 10, with the market widely expecting the Fed to likely cut interest rates by 25 basis points again. (Bullish★)

Fundamentals:Domestically, some new aluminum projects began powering up pots, with operating capacity edging up and weekly production increasing slightly; overseas, Indonesia's new aluminum project is ramping up production, and supply is expected to increase MoM. Regarding the proportion of liquid aluminum, last week's SMM weekly proportion of liquid aluminum recorded 76.6%, down 0.26 percentage points WoW. As the off-season deepens, downstream operating rates showed a marginal decline trend, with aluminum billet enterprises expected to implement more production cuts in December. Inventory-wise, according to SMM statistics, this Monday's primary aluminum ingot inventory in mainstream domestic consumption areas recorded 595,000 mt, destocking 1,000 mt compared to last Thursday. On one hand, aluminum ingot transportation in Xinjiang faces seasonal resistance with tight transport capacity, likely causing some accumulation in Xinjiang; on the other hand, high absolute prices reduced downstream purchase willingness, and warehouse withdrawals are expected to be affected.

Primary Aluminum Market:In the morning session, the SHFE aluminum 12 contract's trading center shifted downward. East China market trading was sluggish, with high absolute prices making downstream purchases cautious; amid wide premiums and discounts, some traders' willingness to sell decreased, with actual transaction prices hovering around SMM average prices at discounts of 20-10 yuan/mt. This Monday, the East China market selling sentiment index was 2.61, down 0.09 WoW; the purchasing sentiment index was 2.58, down 0.04 WoW. SMM A00 aluminum closed at 21,920 yuan/mt, down 170 yuan/mt from the previous trading day, at a discount of 90 yuan/mt against the December contract, down 10 yuan/mt from the previous trading day. Trading activity in the central China market was relatively sluggish on Monday this week. With premiums and discounts being too wide, holders' willingness to sell weakened significantly. Meanwhile, downstream enterprises saw reduced operating rates, leading to weaker raw material demand. Most purchases were made by traders for hedging purposes, with weak willingness to hold prices firm. The actual transaction prices continued to weaken, hovering between a premium of 10 yuan/mt to the central China price and a discount of 10 yuan/mt to the central China price. The sales sentiment index in the central China market was 2.88 on Monday this week, down 0.01 MoM; the purchasing sentiment index was 2.76, down 0.01 MoM. SMM central China price closed at 21,770 yuan/mt, down 170 yuan/mt from the previous trading day, at a discount of 240 yuan/mt against the December contract, down 10 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -150 yuan/mt, flat from the previous trading day.

Recycled Aluminum Raw Materials:Spot primary aluminum prices fell on Monday this week compared to the previous trading day, with SMM A00 spot aluminum closing at 21,920 yuan/mt, and the aluminum scrap market followed the decline collectively. Entering December, downstream demand for aluminum scrap showed significant divergence. Demand for scrap used in cast aluminum alloys remained stable with a slight increase, providing more support for consumption. In Henan, intensified year-end environmental protection inspections and transportation restrictions affected delivery efficiency. Meanwhile, some scrap utilization enterprises reported high inventories of extrusion scrap accumulated during the peak season, lacking sufficient orders on hand to hedge against raw material inventories, thus temporarily slowing the procurement pace for extrusion scrap. On Monday this week, baled UBC was quoted at 16,350-16,850 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was quoted at 18,300-18,850 yuan/mt (ex-tax). Baled UBC fell 100 yuan/mt MoM, while clean tapping aluminum wire, mixed aluminum extrusion scrap free of paint, mechanical casting aluminum scrap, scrap motorcycle wheel, and mixed aluminum tense scrap dropped 100-200 yuan/mt MoM. In terms of the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and shredded aluminum tense scrap closed at 1,761 yuan/mt on December 5, and the price difference between A00 aluminum and bare bright aluminum wire in Jiangsu was 876.0 yuan/mt. The aluminum scrap market is expected to hover at highs next week, with shredded aluminum tense scrap (priced based on aluminum content) mainly ranging 18,500-19,200 yuan/mt (ex-tax). The tight supply situation is hard to change, with import and recycling constraints persisting, providing a floor for prices. Demand side, the year-end push for annual targets in the secondary aluminum sector and the high-price suppression effect intertwined, making extrusion and rolling scrap utilization enterprises cautious about purchasing due to high prices. Primary aluminum price trends serve as the core guidance, coupled with the impact of environmental protection-driven production restrictions and transportation constraints in central China, market sentiment remained cautious. Overall, the tug-of-war between sellers and buyers continues, and it is necessary to closely track fluctuations in primary aluminum, environmental protection policies, and downstream procurement pace, while staying alert to high-price correction risks.

Secondary Aluminum Alloy:In the futures market, the most-traded cast aluminum alloy futures contract 2602 opened at 21,070 yuan/mt on Monday this week, hit a high of 21,175 yuan/mt, a low of 20,910 yuan/mt, and finally closed at 21,135 yuan/mt, down 55 yuan/mt or 0.26% from the previous close. Trading volume was 5,056 lots, open interest was 17,202 lots, and bears increasing positions dominated the futures. Currently, the price spread between AD and AL remained above 1,000 yuan. Spot side, on Monday, SMM A00 aluminum spot prices fell 170 yuan/mt to 21,920 yuan/mt, while ADC12 prices dropped 100 yuan/mt to 21,600 yuan/mt. The pullback in aluminum prices from highs pressured down aluminum scrap costs, and the spot market showed a broad decline. Demand side, short-term intensified aluminum price fluctuations dampened downstream procurement pace; some die-casting enterprises faced squeezed profits due to cost pressures, even falling into losses, leading to lower operating rates. However, year-end end-user rush demand still supported the industry. Overall, short-term ADC12 prices are expected to continue fluctuating at highs. Import side, driven by aluminum scrap shortages, current ADC12 offers in Southeast Asia rose quickly to $2,640–2,660/mt, and the immediate import loss widened to over 400 yuan/mt, further suppressing import window activity.

Aluminum Market Summary:On the macro front, positive sentiment continued to strengthen. China's Politburo meeting set the tone for next year's economic work, emphasizing domestic demand, innovation, and green transition, providing solid policy support for aluminum's medium and long-term demand in areas like new energy and green consumption. Combined with widespread expectations for another US Fed interest rate cut in December, the prospect of global liquidity easing continued to boost metal market sentiment. Fundamentals side, this year's Chinese New Year break falls later, so the weakening in aluminum demand in December was limited; new aluminum capacity production release still requires some time, limiting December production growth. Additionally, aluminum ingot transportation in Xinjiang is expected to face some seasonal obstacles, so aluminum ingot inventory performance is expected to be relatively favorable, providing some fundamental support for aluminum price rises. In summary, strong macro expectations built a solid bottom support for aluminum prices, but seasonal fundamental pressures are gradually emerging. Under the interplay of these factors, upside room for aluminum prices is constrained by weakening spot fundamentals and downstream fear of highs, warranting caution against high-level pullback risks.

[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.]