Macro Policy Direction and Low Inventory Support Aluminum Prices, Potential Trade Friction Risks Limit Upside Room [SMM Aluminum Morning Meeting Minutes]

12.12 SMM Morning Meeting Minutes

Futures:SHFE aluminum closed at 22,175 yuan/mt in the night session, up 0.82%. The price stood above all major moving averages, with MA5 (22,174) and MA10 (22,168.5) forming a bullish alignment, indicating a strong short-term structure. The MACD dual lines were above the zero axis (DIF 4.2787, DEA 3.3368), with the histogram expanding to 1.8839, showing enhanced bullish momentum. Trading volume increased slightly (VOLUME 302, MA5 268), indicating a recovery in market participation. The core trading range for SHFE aluminum is suggested at 21,950-22,100. LME aluminum closed at $2,895/mt, up 1.14%. The price rebounded near MA5 ($2,896.2) but remained suppressed by MA60 ($2,898.99), with the moving average system still bearish. The MACD dual lines were below the zero axis (DIF -0.7280, DEA -0.6449), with the negative histogram narrowing to -0.1662, indicating weakening bearish momentum. The core trading range for LME aluminum is suggested at $2,850-2,920.

Macro Front:The Central Economic Work Conference was held in Beijing, setting the tone for next year's economic work. It emphasized continuing to implement more proactive fiscal policies, maintaining necessary fiscal deficits, total debt, and expenditure levels, and prioritizing resolving local fiscal difficulties. It stressed adhering to innovation-driven development, deepening and expanding "AI+", intensifying efforts to curb "involutionary" competition, accelerating the construction of a new-type energy system, and expanding the application of green electricity. (Bullish ★) Mexico will impose tariffs ranging from 5% to 50% on some products from China and other Asian countries starting next year. A spokesperson for the Ministry of Commerce expressed hope that Mexico would correct its mistaken practices early. To safeguard the interests of relevant Chinese industries, the Ministry of Commerce initiated an investigation into Mexican trade and investment barriers in accordance with the law at the end of September, and the investigation is currently ongoing. (Bearish ★)

Fundamentals:Supply side, domestic operating aluminum capacity currently stands at 44.39 million mt. Despite high profits, operating capacity increased only slightly, with overall change being relatively small. Demand side, although December is a traditional consumption off-season, consumption in sectors like automotive, power, and electronics showed strong resilience without exhibiting weakness beyond seasonal patterns; the proportion of liquid aluminum also remained high. Combined with delayed shipments of aluminum ingots from Xinjiang and resilient consumption of aluminum semis, social inventory of aluminum ingots has not yet entered a phase of sustained inventory buildup. According to SMM statistics, as of December 11, mainstream social inventory of aluminum was 584,000 mt, a decrease of 11,000 mt from this Monday, remaining at a relatively low level, providing some support for aluminum prices.

Primary Aluminum Market:In the early session, the SHFE aluminum 2601 contract's trading center rose. Due to shipment disruptions in Xinjiang, aluminum ingots accumulated in the region, leading to destocking in social inventory of aluminum ingots. Spot market supply tightened, spot transactions recovered, and discounts narrowed. Trading activity in the east China market rebounded, with some traders purchasing to fulfill long-term contracts. Suppliers held prices firm and were reluctant to sell, with actual transactions mainly at a premium of about 10 yuan/mt against the SMM average price, and spot discounts narrowed. On Thursday, the selling sentiment index in the east China market was 2.82, up 0.11 WoW; the buying sentiment index was 2.73, up 0.1 WoW. SMM A00 aluminum closed at 21,890 yuan/mt, up 120 yuan/mt from the previous trading day, at a discount of 120 yuan/mt against the 2601 contract and 60 yuan/mt against the 2512 contract. On Thursday, in the central China market, major suppliers held prices firm and were reluctant to sell, spot supply was tight, traders' buying sentiment was high, creating a situation of nominal prices without actual transactions, and offers continued to rise. After market prices rose to 50 yuan/mt, major suppliers started selling, easing the scramble for goods. Ultimately, actual transaction prices ranged from a premium of 20 yuan to 50 yuan against the central China price. On Thursday, the selling sentiment index in the central China market was 2.61, down 0.17 WoW; the buying sentiment index was 2.78, down 0.01 WoW. SMM central China closed at 21,820 yuan/mt, up 160 yuan/mt from the previous trading day, at a discount of 190 yuan/mt against the 2601 contract and 130 yuan/mt against the 2512 contract. The price difference between Henan and Shanghai was -70 yuan/mt, up 40 yuan/mt from the previous trading day.

Recycled Aluminum Raw Materials:On Thursday, spot primary aluminum prices rose compared to the previous trading day, with SMM A00 spot closing at 21,890 yuan/mt, and the aluminum scrap market followed the increase collectively. Some scrap utilization enterprises reported high inventories of wrought aluminum alloy scrap collected during the peak season, lacking sufficient orders on hand to hedge raw material inventories, thus temporarily slowing the procurement pace for such scrap. Additionally, environmental protection-driven production restrictions in Chongqing affected alloy enterprises' operating rates, leading to a slight weakening in downstream demand for aluminum scrap. In the imported aluminum scrap market, raw materials were tight, and traders mostly maintained low inventories. However, a narrow mid-week correction in aluminum prices led to a decline in aluminum scrap prices. Some aluminum scrap suppliers held prices firm and were reluctant to sell, while downstream alloy enterprises also faced tight recycled aluminum raw materials. On Thursday, baled UBC was concentratedly offered at 16,350-16,850 yuan/mt (ex-tax), shredded aluminum tense scrap (priced based on aluminum content) was concentratedly offered at 18,200-18,750 yuan/mt (ex-tax). 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 were raised by 100 yuan/mt WoW. Regarding the price difference between A00 aluminum and aluminum scrap, on December 11, the price difference between A00 aluminum and shredded aluminum tense scrap closed at 1,946 yuan/mt, and the price difference between A00 aluminum and bare bright aluminum wire in Jiangsu was 900.6 yuan/mt. The aluminum scrap market is expected to hover at highs this week, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) at 18,500-19,200 yuan/mt (ex-tax). The tight supply pattern is difficult to change, with constraints on imports and recycling still present, providing a floor for prices. Demand side, the year-end push for annual targets in secondary aluminum and the inhibitory effect of high prices are intertwined, leading extrusion and rolling scrap utilization enterprises to be cautious about purchasing due to high prices. The primary aluminum price trend served as the core guidance, coupled with the impact of environmental protection-driven production restrictions and transportation constraints in central China, leading to a cautious market sentiment. The overall tug-of-war between sellers and buyers continued, requiring close monitoring of primary aluminum fluctuations, environmental protection policies, and downstream procurement pace, while remaining vigilant against the risk of a pullback from high levels.

Secondary Aluminum Alloy:Futures: On Thursday, the most-traded cast aluminum alloy futures contract, 2602, opened at 20,920 yuan/mt and quickly surged, reaching an intraday high of 21,050 yuan/mt. By 14:00, it closed at 20,970 yuan/mt, up 40 yuan/mt or 0.19% from the previous trading day, marking a second consecutive day of gains. The futures market showed a trend dominated by bulls increasing their positions. Spot Market: On Thursday, the SMM A00 aluminum spot price rose by 120 yuan/mt to 21,890 yuan/mt, while the ADC12 price rebounded by 100 yuan/mt to 21,600 yuan/mt, recovering yesterday's losses. This week saw the first rebound in aluminum prices, to which the secondary aluminum market responded positively, with manufacturers generally raising their offers by 100-200 yuan/mt. Cost Side, although aluminum scrap prices followed the aluminum price correction, leading to a slight weakening of cost support, they remained at a relatively high level due to tight supply. Demand Side, showed signs of marginal weakening, and combined with the impact of sharp aluminum price fluctuations, downstream enterprises' purchase willingness turned cautious, resulting in generally moderate market activity. Comprehensive analysis of the supply-demand pattern and cost factors suggests that the ADC12 aluminum alloy price is expected to continue its sideways movement in the short term. Imports: Currently, ADC12 offers in the Southeast Asian market held steady at $2,620–2,640/mt. Due to the rapid rebound in domestic prices, the immediate import loss narrowed to around 200 yuan/mt.

Aluminum Market Summary:On the macro front, the Central Economic Work Conference confirmed the continuation of proactive fiscal policy next year and emphasized artificial intelligence and the construction of a new-type energy system, providing a strong boost to medium and long-term demand for aluminum in high-end manufacturing and green energy sectors, constituting a core bullish support. Although Mexico's tariff measures raised some trade friction concerns, their targeted nature and China's initiated counter-investigation have kept the impact on market sentiment relatively contained. Demand Side, during the traditional off-season, consumption in major downstream industries such as automotive and power showed unexpected resilience, with the proportion of liquid aluminum remaining high. In summary, the positive macro policy stance and the reality of continuously declining low inventory have jointly built strong support below aluminum prices, boosting market sentiment. However, slow supply growth and potential trade friction risks also limit the pace of price increases. Aluminum prices are expected to fluctuate upward in the short term.

[The information provided is for reference only. This article does not constitute direct investment research or decision-making advice. Clients should make decisions cautiously and not use this to replace their own independent judgment. Any decisions made by clients are unrelated to SMM.]