Domestic and international liquidity easing supports aluminum prices hovering at highs [SMM Aluminum Morning Meeting Minutes]

12.25 SMM Morning Meeting Minutes

Futures:During the night session on December 24, the SHFE aluminum 2602 contract opened at 22,300 yuan/mt, reached a high of 22,300 yuan/mt and a low of 22,060 yuan/mt, and closed at 22,145 yuan/mt, down 0.83%. Trading volume was 140,000 lots, and open interest was 285,000 lots. Technically, the MA system showed a bullish alignment (MA5: 22,215 > MA10: 22,088 > MA20: 22,050.75 > MA60: 21,554.08), with price trading above the moving averages, indicating the medium and long-term uptrend remained intact. The night session's retreat after a rapid rise suggested selling pressure above, while support below held firm, intensifying the tug-of-war between bulls and shorts; a clear directional signal awaits a breakout. LME aluminum opened at $2,947/mt, hit a high of $2,969.5/mt, a low of $2,943.5/mt, and finally closed at $2,956.5/mt. Trading volume was 11,800 lots, down 4,021 lots, while open interest was 679,000 lots, down 1,545 lots.

Macro Front:Globally accommodative liquidity is one of the core factors driving aluminum prices higher. Although US November non-farm payrolls data slightly exceeded expectations, the unemployment rate climbed to a four-year high, leading the market to generally conclude that the US Fed will not alter its accommodative monetary stance; coupled with the Fed's continued interest rate cuts in December, the accommodative liquidity environment overseas strengthened further, providing bullish support for the non-ferrous metals sector. (Bullish ★) Domestically, the central bank announced that, to maintain ample liquidity in the banking system, it will conduct a 400 billion yuan 1-year MLF operation on December 25, 2025, using a fixed amount, interest rate tender, and multiple-price award method. (Bullish ★)

Fundamentals:Inventory side, according to SMM statistics, inventory of aluminum ingots in major domestic consumption areas recorded 617,000 mt this Thursday, an increase of 17,000 mt from Monday and up 39,000 mt WoW.

Primary Aluminum Market:In the early session, the SHFE aluminum 2601 contract fluctuated upward. Trading sentiment in the east China market remained weak, as some manufacturers halted trade for year-end settlement and account closing, leading to a decline in both buying and selling sentiment. Market offers were mainly at a discount of 20 yuan/mt to a premium of 10 yuan/mt against the SMM average, with mainstream transactions concluded between a discount of 10 yuan/mt and the average. Approaching year-end, both selling and purchasing sentiment were weak. This Thursday, the selling sentiment index in the east China market was 2.38, down 0.03 WoW; the purchasing sentiment index was 2.34, down 0.04 WoW. The SMM A00 aluminum price was quoted at 22,030 yuan/mt, up 160 yuan/mt from the previous trading day, at a discount of 170 yuan/mt against the 2601 contract, unchanged from the previous day. Trading in the central China market cooled again this Thursday. Current premiums and discounts were wide. While aluminum prices rebounded, the impact of environmental protection inspections in the central China region persisted, keeping downstream buying sentiment consistently low. Some suppliers reported that major players entered the market for purchasing, but the actual trading volume was limited. The final market transaction prices ranged from a discount of 20 yuan to a premium of 10 yuan against the central China price. This Thursday, the sales sentiment index in the central China market was 2.77, up 0.02 MoM; the purchasing sentiment index was 2.25, down 0.19 MoM. The SMM spot aluminum price in central China closed at 21,870 yuan/mt, up 160 yuan/mt from the previous trading day, at a discount of 330 yuan/mt against the 2601 futures contract, flat from the previous day; the price spread between Henan and Shanghai was -160 yuan/mt, also remaining stable.

Recycled Aluminum Raw Materials: This Thursday, spot primary aluminum prices rebounded compared to the previous trading day, with SMM A00 aluminum closing at 22,030 yuan/mt, and the aluminum scrap market followed the upward trend overall. Some scrap utilization enterprises reported high inventories of wrought aluminum alloy scrap accumulated during the peak season, lacking sufficient orders on hand to hedge against raw material inventories, thus temporarily slowing down the procurement pace for related scrap. Additionally, repeated environmental protection-driven production restrictions in Chongqing led to a slight weakening in aluminum scrap demand from downstream sectors. Secondary aluminum alloy scrap utilization enterprises indicated that as Chinese New Year stockpiling is expected to begin soon, they are currently conducting concentrated procurement of aluminum scrap raw materials, thereby accelerating the procurement pace for aluminum tense scrap. As 2026 approaches, the implementation of resource recycling policies still faces multiple obstacles, with issues concerning natural persons and invoice upper limits remaining difficult to resolve. Some recycling enterprises have already chosen to pass on additional tax burdens to the aluminum scrap supply side, posing a risk of downward pressure on the bottom of aluminum scrap prices. This Thursday, concentrated offers for baled UBC were in the range of 16,450-16,950 yuan/mt (tax excluded), and shredded aluminum tense scrap (priced based on aluminum content) was offered in the range of 18,300-18,800 yuan/mt (tax excluded). Baled UBC prices were raised by 100 yuan/mt MoM, while aluminum tense scrap prices followed the increase by 200 yuan/mt. The aluminum scrap market is expected to continue hovering at highs this week, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) projected at 18,000-18,500 yuan/mt (tax excluded). The tight supply situation for aluminum scrap is difficult to change in the short term, and shortages of imported raw materials are providing a floor for prices. As pre-Chinese New Year stockpiling is about to begin, concentrated raw material procurement by some scrap utilization enterprises will offer some support to scrap demand. However, repeated environmental protection-driven production restrictions in central and south-west China are keeping market participants' sentiment predominantly cautious. Overall, the tug-of-war between sellers and buyers in the aluminum scrap market is expected to persist next week. Close attention should be paid to fluctuations in primary aluminum prices, the implementation of environmental protection-driven production restrictions, and changes in the procurement pace of downstream enterprises, while remaining vigilant against the risk of a pullback from highs.

Secondary Aluminum Alloy: On the futures side, this Thursday, the most-traded cast aluminum alloy 2602 contract opened at 21,215 yuan/mt. After opening, the price initially rose slightly, then entered a phase of fluctuating pullback, touching the intraday low of 21,130 yuan/mt during the session. Subsequently, the price rebounded rapidly from the low and shifted to rangebound fluctuation, with its center gradually lifting above the intraday moving average. Towards the end of the session, the price surged again and continued to climb, refreshing the intraday high to 21,485 yuan/mt, and finally closed at 21,480 yuan/mt, up 215 yuan/mt or 1.01% from the previous trading day. Futures saw bears reducing their positions. In Thursday's spot market, the SMM A00 aluminum price surged by 160 yuan/mt to 22,030 yuan/mt, while the ADC12 price rose rapidly by 150 yuan/mt to 21,950 yuan/mt. Aluminum prices climbed back above the 22,000 yuan mark, driving secondary aluminum prices to increase actively. Currently, raw material supply is relatively tight, coupled with secondary aluminum enterprises entering a stockpiling phase, aluminum scrap demand has risen, leading to rapid price increases and pushing up ADC12 costs. Additionally, copper prices hit a new high of 94,690 yuan/mt, driving up prices for aluminum tense scrap and high-copper-content alloy ingots noticeably. However, demand side weakened marginally, with overall market transactions performing sluggishly; in terms of supply, factors such as environmental protection-related controls or losses continued to exert pressure on contraction. Overall, cost support and supply tightening jointly solidified the price floor, but demand slowdown and aluminum prices fluctuating at highs suppressed downstream purchase willingness. ADC12 prices are expected to maintain a fluctuating trend at highs in the short term. On the import side, overseas ADC12 offers currently hold steady at $2,630–2,650/mt. Driven by domestic price increases and a stronger yuan, the immediate import profit/loss has rebounded above the 50 mark, theoretically opening the import window.

Aluminum Market Summary:Overall, on the macro front, domestic and overseas macro sentiment leans favorable, with market expectations for US Fed interest rate cuts strengthening, benefiting aluminum and non-ferrous metal sectors. Fundamentally, domestic fundamentals currently struggle to provide strong support for sustained aluminum price increases, with end-use demand weak and the proportion of liquid aluminum declining accordingly. In summary, although fundamental driving forces are limited, domestic and overseas macro performance remains optimistic, and aluminum prices continue to fluctuate at highs.

[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.]