Macro and Fundamentals in a Tug-of-War, Aluminum Prices Expected to Hover at Highs in the Short Term [SMM Aluminum Morning Meeting Minutes]

SMM Morning Meeting Minutes for Jan. 12

Futures: On the night session of Jan. 9, the SHFE aluminum 2603 contract opened at 24,560 yuan/mt, closed at 24,465 yuan/mt, up 0.33%, hit a high of 24,700 yuan/mt, touched a low of 24,375 yuan/mt, with a trading volume of 271,000 lots and open interest of 351,000 lots. Technically, the MA system showed a bullish alignment (MA5: 24,284 > MA10: 23,578.5 > MA20: 22,863.5 > MA60: 22,023.5), and the medium and long-term uptrend remained intact. LME aluminum opened at $3,088/mt, reached a high of $3,161/mt, a low of $3,082.5/mt, and finally closed at $3,149/mt, up 1.98%. Trading volume was 37,700 lots, an increase of 5,168 lots, and open interest was 688,000 lots, up 420 lots.

Macro Front: The National Commerce Work Conference was held in Beijing from Jan. 10 to 11. The meeting pointed out the need to accelerate the cultivation of new growth points in service consumption and unleash the potential of service consumption. (Bullish ★) US non-farm payrolls increased by 50,000 in December, compared with an estimated increase of 70,000 and a previous increase of 64,000. The US unemployment rate was 4.4% in December, versus an estimate of 4.5% and a previous rate of 4.6%. Citi expects the US Fed to cut interest rates by 25 basis points each in March, July, and September, compared with previous forecasts for cuts in January, March, and September this year. Morgan Stanley expects the US Fed to cut interest rates by 25 basis points each in June and September, compared with previous forecasts for cuts in January and April this year. (Neutral)

Fundamentals: Inventory side, according to SMM statistics, aluminum ingot inventory in mainstream domestic consumption areas recorded 730,000 mt last Friday, with an inventory buildup of 16,000 mt WoW from last Thursday and an increase of 46,000 mt WoW from last Monday.

Primary Aluminum Market: In the morning session, the SHFE aluminum 2601 contract fluctuated upward, but the price center edged down slightly from the previous trading day. Influenced by the spot-futures price spread, traders' buying sentiment improved. Last Friday, overall market selling sentiment also rebounded. Mainstream transaction prices were mainly in the range of a premium of 30-50 yuan/mt against the SMM price. Last Friday, the east China market selling sentiment index was 2.71, up 0.33 WoW; the purchasing sentiment index was 2.83, down 0.15 WoW. SMM A00 aluminum was quoted at 24,030 yuan/mt, up 30 yuan/mt from the previous trading day, at a discount of 100 yuan/mt against the 2601 contract, narrowing by 50 yuan/mt from the previous trading day. Last Friday, selling sentiment in the central China market saw a slight rebound, with premiums and discounts continuing to recover. Some holders showed stronger willingness to sell, while hedging-related purchases remained the mainstream trend. However, the number of buyers decreased, leading prices to pull back after a sustained rise. After SMM released its indicative price, market sentiment turned noticeably weaker. The actual transaction prices in the central China market ultimately hovered around a premium of 10 yuan to 70 yuan against the central China price. Last Friday, the selling sentiment index in the central China market was 2.48, down 0.01 MoM; the purchasing sentiment index was 2.13, up 0.01 MoM. The SMM central China aluminum price closed at 23,860 yuan/mt, up 50 yuan/mt from the previous trading day, at a discount of 270 yuan/mt against the 2601 contract, up 70 yuan/mt from the previous trading day; the Henan-Shanghai price spread was -170 yuan/mt, up 20 yuan/mt from the previous trading day.

Recycled Aluminum Raw Materials:Last Friday, spot primary aluminum prices fluctuated rangebound compared to the previous trading day, with SMM A00 spot closing at 24,030 yuan/mt, while aluminum scrap market prices remained flat overall. Last Friday, baled UBC scrap was mainly quoted at 17,750-18,150 yuan/mt (tax excluded), and shredded aluminum tense scrap (priced based on aluminum content) was mainly quoted at 19,300-19,800 yuan/mt (tax excluded). In terms of 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 3,836 yuan/mt on January 9, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,761 yuan/mt. With aluminum prices at highs, aluminum scrap is forced to follow the rise, resulting in a "nominal price without actual market" scenario. Scrap yards are cautiously purchasing to ensure the safety of their capital chains, while downstream buying sentiment has been dampened, leading to purchasing as needed. Aluminum scrap market is expected to hover at highs next week, with shredded aluminum tense scrap (priced based on aluminum content) mainly ranging from 18,800 to 19,200 yuan/mt (tax excluded). High primary aluminum prices will provide bottom support for aluminum scrap, but inefficient cost transmission along the industry chain will limit upside room. Inventory pressure on the supply side and the fragmented sources of scrap are unlikely to change in the short term. Demand-side suppression is intensifying, as enterprises gradually enter holiday cycles ahead of the Chinese New Year, further reducing the operating rate of secondary aluminum producers and expanding the scope of production cuts and shutdowns downstream, making it difficult for stocking demand to provide effective support. Overall, the tug-of-war between sellers and buyers continues, requiring close monitoring of primary aluminum trends, downstream shutdown progress, and pre-holiday transaction conditions, while remaining vigilant against high-level pullback risks.

Secondary Aluminum Alloy:On the futures side, the aluminum alloy 2603 contract opened at 22,720 yuan/mt last Friday. After opening, it experienced brief fluctuations, declining to a low of 22,180 yuan/mt, then began a sustained upward trend with gradually expanding gains, reaching an intraday high of 23,320 yuan/mt, but retreated after the rapid rise in the final session, ultimately closing at 22,985 yuan/mt, up 400 yuan/mt or 1.77% from the previous close. Bulls mainly increased positions. In the spot market, aluminum prices resumed their rise last Friday, with A00 aluminum up 30 yuan/mt to 24,030 yuan/mt, while the SMM ADC12 price remained stable at 23,700 yuan/mt. Secondary aluminum alloy producers' quotations were generally steady, with some raising offers by 100-200 yuan/mt to recover from yesterday afternoon's decline. Market transactions remained driven by rigid demand, with limited downstream acceptance of high prices and a strong wait-and-see sentiment. The current secondary aluminum market is influenced by a mix of bullish and bearish factors: cost support and tight supply conditions provide a floor for prices, but weakening demand also exerts downward pressure. Overall, ADC12 prices are expected to hover at highs in the near term, with caution advised against potential pullbacks from elevated levels. On the import front, overseas ADC12 offers have stabilized in the range of $2,820–2,850/mt, while the real-time profit margin for imports remains around 500 yuan/mt.

Aluminum Market Summary:The macro front remains robust recently, with expectations for US Fed interest rate cuts continuing to drive the logic of a monetary easing cycle, supporting nonferrous metal prices and fueling catch-up gains. The dual catalysts of monetary easing and new consumption policies have boosted risk appetite in commodity markets and reinforced demand expectations, resonating with overseas factors to further solidify the foundation for aluminum price increases. In the domestic market, the National Taxation Administration's announcement last Friday canceling export tax rebates for PV products may trigger a rush to meet deadlines in the PV sector, leading to a short-term, phased boost in consumption. While current fundamentals—such as consumption under pressure and accumulating social inventory—pose some constraints on sustained aluminum price rises, strong macro policy expectations and geopolitical risks continue to provide support, driven by sentiment and capital flows. Aluminum prices are expected to fluctuate at highs.

[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 content to replace independent judgment. Any decisions made by clients are unrelated to SMM.]