Spot Demand Temporarily Shrinks, Aluminum Prices Under Pressure in the Short Term [SMM Aluminum Morning Meeting Minutes]

SMM Morning Meeting Minutes 12.3

Futures:SHFE aluminum closed the night session at 22,320 yuan/mt, down 0.95%. Prices fluctuated rangebound around multiple moving averages, currently slightly above the MA5 (22,318) and MA10 (22,316), but near the MA30 (22,319.17) and MA60 (22,319.67), showing an overall consolidation pattern. In the MACD indicator, the DIF (-0.3588) and DEA (-0.7185) remained below the zero line, but the histogram turned positive (0.7195), indicating weakened short-term downward momentum and a potential for recovery. Trading volume rebounded slightly (VOLUME 231, MA5 127), but remained at relatively low levels. The core trading range for SHFE aluminum was suggested at 22,200-22,650. LME aluminum closed the night session at $2,950.5/mt, down 0.20%. Prices were slightly below the cluster of moving averages from MA5 ($2,952) to MA60 ($2,951.55), indicating a short-term balance under the suppression of the moving averages. The MACD lines were near the zero line (DIF 0.0499, DEA 0.1566), with the histogram turning negative (-0.2372), showing signs of struggling to rise and slight weakening. The core trading range for LME aluminum was suggested at $2,920-$2,980.

Macro Front:The State Administration for Market Regulation emphasized key tasks for 2026, stating the need to continuously deepen fair competition governance, intensify efforts to break administrative monopolies, strengthen anti-monopoly and anti-unfair competition enforcement, and thoroughly rectify "involutionary" competition. It also emphasized strengthening normalized regulation of the platform economy. (Bullish ★) On December 29, 2025, the Customs Tariff Commission of the State Council issued an announcement adjusting import tariff rates and categories for some goods effective January 1, 2026. The tariffs for unwrought aluminum alloys (HS code 76012000) and aluminum shredded scrap (HS code 76020000) remained unchanged from 2025. (Neutral ★)

Fundamentals:Supply side, new aluminum projects in China and Indonesia continued ramping up production, leading to a continued increase in daily average production; additionally, a new aluminum project in Inner Mongolia announced a successful power-on date of December 20. In the near future, daily average aluminum production is expected to continue growing. Demand side, high prices suppressed downstream cargo pick-up demand, coupled with persistently intensified environmental protection-related controls in central China, leading to complete production halts at some local aluminum processing enterprises. Spot demand subsequently continued to shrink, with production expected to gradually resume after the New Year's Day holiday. Operating rates declined. Inventory side, according to SMM statistics, inventory of aluminum ingots in mainstream domestic consumption areas recorded 645,000 mt this Monday, showing an inventory buildup of 28,000 mt compared to last Thursday.

Primary Aluminum Market:In the early session, the SHFE aluminum 2601 contract performed strongly, with prices rising overall and the price center noticeably higher than the previous trading day. Market sentiment in east China weakened overall, primarily affected by year-end enterprise settlement and account closing, leading to generally low market liquidity. Coupled with the rise in SHFE aluminum prices, the mainstream transaction discount further widened. On Monday, mainstream transaction prices were mainly in the range of a 20-10 yuan/mt discount to the SMM average price. The east China market selling sentiment index was 2.13 on Monday, down 0.09 WoW; the buying sentiment index was 2.20, down 0.19 WoW. The SMM A00 aluminum price was quoted at 22,490 yuan/mt, up 470 yuan/mt from the previous trading day, at a 200 yuan/mt discount against the 2601 contract, down 10 yuan/mt from the previous trading day. Trading in the central China market continued to weaken on Monday, with the impact of environmental protection-driven production restrictions intensifying. Most downstream processing enterprises fully halted production and stopped raw material procurement, with aluminum ingot circulation limited to traders. Combined with high aluminum prices, overall procurement sentiment in the current market was weak. Final actual transaction prices hovered around a 10-40 yuan/mt discount to the central China price. The central China market selling sentiment index was 2.73 on Monday, up 0.02 WoW; the buying sentiment index was 1.37, down 0.61 WoW. The SMM central China aluminum price closed at 22,300 yuan/mt, up 450 yuan/mt from the previous trading day, at a 390 yuan/mt discount against the 2601 contract, down 30 yuan/mt from the previous trading day; the Henan-Shanghai price spread was -190 yuan/mt, down 20 yuan/mt from the previous trading day.

Recycled Aluminum Raw Materials:On Monday, spot primary aluminum prices rose significantly compared to the previous trading day, with the SMM A00 spot price closing at 22,490 yuan/mt. The aluminum scrap market followed the primary aluminum price upward. Some scrap utilization enterprises reported high inventories of wrought aluminum alloy scrap collected during the peak season, lacking sufficient orders on hand to hedge against raw material inventories, thus temporarily slowing the procurement pace for related scrap. As 2026 approaches, the implementation of resource recycling policies still faces numerous obstacles, with issues such as 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. On Monday, baled UBC was quoted at 16,800-17,200 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was quoted at 18,400-18,900 yuan/mt (ex-tax). Prices in Shanghai, Zhejiang, Jiangsu, Tianjin, and Shandong increased by 200-500 yuan/mt on Monday, while prices in Guizhou, Henan, Jiangxi, and Hubei rose by 100-200 yuan/mt. 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 was 3,006 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,039 yuan/mt. Domestic aluminum scrap prices are expected to hover at highs around the New Year holiday, while also needing to be cautious of the risk of a correction from high levels. Supply side, the issue of tax burden transfer further affects the market supply structure. Demand side, the stocking demand of secondary aluminum alloy enterprises for Chinese New Year will continue to support the procurement of aluminum tense scrap. However, the signs of slowing demand from downstream die-casting enterprises and the wait-and-see sentiment brought about by aluminum price fluctuations have led to a decline in overall demand support for prices. On the policy front, the uncertainty of repeated environmental protection-driven production restrictions in central China and Chongqing regions will continue to suppress local demand in the short term. In terms of price trends, the center of shredded aluminum tense scrap (priced based on aluminum content) is expected to hover at 18,200-18,700 yuan/mt (excluding tax). In the short term, close attention should be paid to signals of easing environmental protection-driven production restriction policies, changes in the procurement pace of downstream enterprises, and the impact of tax burden transfer on the price bottom.

Secondary Aluminum Alloy: Futures, on Monday, the most-traded cast aluminum alloy contract 2602 opened at 21,505 yuan/mt. After rising above 21,520 yuan/mt in the early morning, it experienced a slight correction, followed by a fluctuation upward, gradually breaking through the 21,645 yuan/mt mark after 10 am, and continued to rise. In the afternoon, it hit an intraday high of 21,765 yuan/mt, with the gain reaching nearly 1.75%; after 2 pm, the price slightly pulled back. As of 2:10 pm, the futures closed at 21,645 yuan/mt, up 100 yuan/mt or 0.46% from the previous trading day. The bears mainly reduced their positions. In the spot market on Monday, SMM A00 aluminum prices surged 470 yuan/mt to 22,490 yuan/mt; ADC12 prices also rose 400 yuan/mt to 22,400 yuan/mt, hitting a new high since May 2022. With raw material supply remaining tight, coupled with aluminum prices approaching 23,000 yuan/mt and copper prices exceeding 100,000 yuan/mt, the prices of aluminum scrap, especially aluminum tense scrap, quickly followed suit, and the processing fees for high-copper series aluminum alloys also increased accordingly. However, the overall demand performance was weak, with insufficient purchase willingness from downstream buyers, leading to a "price without market" situation. In terms of supply, capacity still faces contraction pressure due to factors such as environmental protection-related controls, raw material shortages, and losses. Overall, cost support and supply tightening jointly solidify the price bottom, but slowing demand and high aluminum price fluctuations dampen downstream purchasing enthusiasm. It is expected that ADC12 prices will maintain a fluctuation at highs in the short term. For imports, overseas ADC12 quotes have risen to the range of $2,660–$2,680/mt, but the increase is less than domestic prices, further expanding the real-time profit margin for imports to 300-500 yuan/mt.

Summary of the Aluminum Market: On the macro front, the State Administration for Market Regulation emphasized deepening fair competition governance, which is beneficial for optimizing the industrial environment in the long run. The tariffs on imported aluminum alloys and aluminum scrap remain unchanged, in line with market expectations, and did not bring additional shocks. On the demand side, high prices and environmental protection-driven production restrictions have jointly constrained the market, with a significant drop in the proportion of liquid aluminum. The operating rates in multiple sectors, including downstream extrusions, remained weak, and spot consumption showed signs of fatigue. Overall, the reality of suppressed fundamental consumption and the initial emergence of an inventory turning point will significantly curb the upward momentum of prices. In the short term, aluminum prices are expected to fluctuate within a range, with clear resistance above.

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