Macro Tailwinds but Weakening Fundamentals, Aluminum Prices Expected to Continue Fluctuating at Highs in the Short Term [SMM Aluminum Price Weekly Review]

SMM December 25:

Macro perspective: Macro sentiment at home and abroad tilted positive. Overseas, the US economy expanded at a 4.3% rate in Q3, the fastest pace in two years. The ADP weekly employment report showed that private sector employers added an average of 11,500 jobs per week in the four weeks ending December 6, 2025. Resilient US economic data bolstered market confidence in base metal demand. Against a backdrop of monetary easing, the US dollar index remained weak, providing support for nonferrous metal futures. Domestically, the central bank's monetary policy committee held its Q4 regular meeting, vowing to continue implementing appropriately easy monetary policy and strengthen counter-cyclical and cross-cyclical adjustments. The People's Bank of China conducted a 400 billion yuan 1-year MLF operation on December 25. The looser domestic liquidity environment provided support for nonferrous metal futures. The Premier pointed out at the central state-owned enterprise heads meeting that efforts will be made to accelerate the renewal of traditional infrastructure and its digital and intelligent transformation, and to appropriately advance new-type infrastructure construction, improving long-term aluminum demand expectations.

Fundamentals: Supply side, newly commissioned aluminum projects in China and Indonesia continued to ramp up, increasing the daily average production. Additionally, a new aluminum project in Inner Mongolia announced a successful power-on on December 20. The daily average aluminum production is expected to continue growing in the near term. Demand side, high prices dampened downstream cargo pick-up demand. Coupled with environmental protection-driven production restrictions affecting downstream processing plants in central China, operating rates declined. The proportion of liquid aluminum dropped 0.61 percentage points WoW. National aluminum ingot social inventory increased by 39,000 mt WoW as of Thursday. Downstream weekly operating rates remained in the doldrums this week, with operating rates for sectors including aluminum extrusion declining WoW.

Overall, while current macro sentiment is positive, short-term fundamentals show a weakening trend. Operating aluminum capacity is increasing, downstream operating rates are weakening, and aluminum ingot social inventory is building, with fundamental performance exerting pressure on the top side of aluminum prices. In the short term, macro tailwinds are contending with fundamental weakness, and aluminum prices are expected to hover at highs. SHFE aluminum is forecast to trade between 21,900-22,400 yuan/mt next week, while LME aluminum is expected to trade between $2,900-$2,980/mt.

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