SHFE Aluminum Night Session Breaks Through 25,000, Aluminum Prices Maintain High Levels [SMM Aluminum Morning Meeting Minutes]

January 13 SMM Morning Conference Minutes

Futures: During the night session on January 12, the SHFE aluminum 2603 contract showed a pattern of retreating after a rapid rise and consolidating at high levels. It opened the night session at 24,750 yuan/mt, hit a high of 25,075 yuan/mt, touched a low of 24,280 yuan/mt, and closed at 24,630 yuan/mt, down 0.08%. Trading volume was 510,000 lots, an increase of 126,000 lots, while open interest stood at 383,000 lots, up 4,112 lots. Technical analysis shows the MA system is in a bullish alignment (MA5: 24,368 > MA10: 23,813 > MA20: 22,993.75 > MA60: 22,088.17), with the medium and long-term uptrend remaining intact. LME aluminum opened at $3,154.5/mt, reached a high of $3,200/mt, touched a low of $3,143/mt, and finally closed at $3,191/mt, up 1.33%. Trading volume was 36,000 lots, and open interest was 688,000 lots.

Macro Front: On the afternoon of January 12, US President Trump posted on social media that any country engaging in commercial dealings with Iran would face a 25% tariff on all its commercial dealings with the US, effective immediately. (Neutral) On January 12, the Ministry of Commerce provided an update on the consultations regarding the EU-China EV case: The EU side will issue the "Guidance Document on Submitting Price Undertaking Applications." The European Commission has committed to conducting an objective and impartial review of applications submitted by Chinese enterprises based on uniform standards and the principle of non-discrimination. Eligible enterprises may use price undertakings as an alternative to countervailing duties. (Neutral)

Fundamentals: Inventory side, according to SMM statistics, on January 12, aluminum ingot inventories across three domestic locations saw a buildup of 16,500 mt, with Wuxi region inventories increasing by 10,500 mt; while aluminum billet inventories in two locations accumulated 11,000 mt, with Guangdong region inventories rising by 9,000 mt.

Primary Aluminum Market: During Monday's early session, the SHFE aluminum 2601 contract fluctuated upward, but the price center was higher compared to the previous trading day. High aluminum prices suppressed downstream purchase demand, leading to an overall decline in trading sentiment WoW. Mainstream transaction prices were mainly in the range from a discount of 30 yuan/mt against the SMM average price to the average price. Yesterday, the east China market selling sentiment index was 2.64, down 0.07 WoW; the purchasing sentiment index was 2.74, down 0.08 WoW. The SMM A00 aluminum offer was 24,340 yuan/mt, up 310 yuan/mt from the previous trading day, at a discount of 100 yuan/mt against the 2601 contract, unchanged from the previous day. On Monday, the absolute aluminum price rose, and with accumulated premiums and discounts being high recently, purchasers significantly decreased. However, selling sentiment in the central China market increased, with major holders showing stronger willingness to sell. Market supply circulation eased, and the willingness to hold prices firm gradually weakened. Eventually, actual transaction prices in the central China market fell from a premium of 30 yuan/mt against the central China price before the opening to a range between a discount of 10 yuan/mt against the central China price. Yesterday, the sales sentiment index in the central China market was 2.58, up 0.11 MoM; the purchasing sentiment index was 1.40, up 0.73 MoM. The SMM aluminum price in central China closed at 24,180 yuan/mt, up 320 yuan/mt from the previous trading day, at a discount of 260 yuan/mt against the 2601 contract, up 10 yuan/mt from the previous trading day; the Henan-Shanghai price spread was -160 yuan/mt, up 10 yuan/mt from the previous trading day.

Recycled Aluminum Raw Materials:On Monday, spot primary aluminum prices rose compared to the previous trading day, with SMM A00 spot closing at 24,340 yuan/mt, and aluminum scrap market prices generally followed the increase. Supply side, environmental protection-driven production restrictions in the central China region were lifted, but inventory levels of wrought aluminum alloy scrap remained saturated. Demand side, the "nominal price without actual transactions" characteristic became prominent, downstream resistance to high prices was strong, with mostly purchasing as needed or digesting inventories, some enterprises planned early production halts, and Chinese New Year stockpiling expectations weakened. Yesterday, baled UBC aluminum scrap was mainly quoted at 17,900-18,300 yuan/mt (tax excluded), shredded aluminum tense scrap (priced based on aluminum content) was mainly quoted at 19,450-19,950 yuan/mt (tax excluded). Regarding the price difference between A00 aluminum and aluminum scrap, on January 12, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 4,121 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,944 yuan/mt. The aluminum scrap market is expected to hover at highs this week, with shredded aluminum tense scrap (priced based on aluminum content) mainstream range at 18,800-19,200 yuan/mt (tax excluded). High primary aluminum prices will provide bottom support for aluminum scrap, but poor cost transmission along the industry chain will limit upside room, inventory pressure on the supply side and the fragmented scrap source pattern are difficult to change in the short term. The suppressing effect on the demand side intensifies, as the Chinese New Year approaches, enterprises gradually enter holiday cycles, the operating rate of secondary aluminum producers will further decline, the scope of downstream production cuts and halts will expand, and stocking demand is unlikely to form effective support. Overall, the tug-of-war between sellers and buyers continues, close tracking of primary aluminum trends, downstream shutdown progress, and pre-holiday transaction conditions is needed, while being cautious of high price correction risks.

Secondary Aluminum Alloy:Futures side, the aluminum alloy 2603 contract opened at 22,985 yuan/mt yesterday, fluctuating at highs overall, touched an intraday high of 23,450 yuan/mt, a low of 22,945 yuan/mt, and finally closed at 23,340 yuan/mt, up 355 yuan/mt or 1.54% from the previous close. Bulls mainly increased positions. Spot market, aluminum prices performed strongly on Monday, with A00 price rising 310 yuan/mt in a single day to 24,340 yuan/mt, breaking the historical high of 24,240 yuan/mt in 2021. SMM ADC12 price followed up 250 yuan/mt, quoted at 23,950 yuan/mt. The secondary aluminum market showed clear follow-up sentiment, mainstream quotations were generally raised by 200-300 yuan/mt, but the market exhibited a "nominal price without actual transactions" characteristic, actual transactions were mainly rigid demand, downstream acceptance of high prices was limited, and wait-and-see sentiment was strong. From the perspective of market drivers, cost support and a tight supply-demand pattern provide a bottom for aluminum prices, but weak demand is constraining price increases. Overall, with the boost from short-term macro tailwinds, ADC12 prices are expected to hover at highs. Currently, bullish and bearish factors are intertwined in the market, requiring close attention to changes in the supply-demand pattern and macro policy direction.

Aluminum Market Summary:Recently, the macro front remains strong; expectations for US Fed interest rate cuts continue to drive the logic of a monetary easing cycle, supporting nonferrous metal prices and creating a catch-up rally. The dual catalysts of monetary easing and new consumption policies are boosting risk appetite in the commodity market and solidifying demand expectations, resonating with overseas factors to further consolidate the foundation for aluminum price gains. In the domestic market, the National Taxation Administration's announcement last Friday of the cancellation of export tax rebates for PV may trigger a rush to meet deadlines, leading to a short-term phased increase in consumption. Currently, the reality of pressured fundamental consumption and accumulating social inventory is somewhat suppressing sustained aluminum price rises. However, strong macro policy expectations and geopolitical risk disturbances, with sentiment and capital flows still dominant, continue to provide support for aluminum prices. Aluminum prices are expected to mainly 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 to replace independent judgment. Any decisions made by clients are unrelated to SMM.]