Macro and Fundamentals Present a Mix of Long and Short Factors, Aluminum Prices Hover at Highs [SMM Aluminum Morning Meeting Minutes]

1.15 SMM Morning Meeting Summary

Futures: On January 14, the SHFE aluminum 2603 contract opened at 24,610 yuan/mt during the night session. After opening, it first declined then rose, reaching a low of 24,425 yuan/mt and a high of 24,780 yuan/mt. It then pulled back and entered consolidation, closing at 24,665 yuan/mt, up 0.28%. Trading volume was 346,000 lots, and open interest was 368,000 lots. From a technical analysis perspective, the MA moving average system is in a bullish arrangement (MA5: 24,534 > MA10: 24,189 > MA20: 23,251.5 > MA60: 22,206), with the medium and long-term upward trend unbroken. LME aluminum opened at $3,186.5/mt, reached a high of $3,225/mt, and a low of $3,176/mt, finally closing at $3,189.5/mt. Trading volume was 28,600 lots, down by 2,126 lots, and open interest was 693,000 lots, up by 627 lots.

Macro Front: The central bank announced that to maintain ample liquidity in the banking system, on January 15, 2026, the People's Bank of China will conduct 900 billion yuan worth of buyout reverse repo operations through a fixed-quantity, rate-tender, multiple-price winning method, with a term of 6 months (181 days). (Bullish ★) US PPI for November grew 3% YoY, estimated at 2.7%; MoM growth was 0.2%, as expected; core PPI for November increased 3% YoY, expected at 2.7%; MoM change was zero, expected at 0.2%. The latest Beige Book released by the US Fed showed that economic activity in most regions of the US has grown recently, with overall employment conditions remaining stable, but inflation pressures have not fully dissipated. This provides a realistic basis for the US Fed to keep interest rates unchanged in the short term and continue monitoring data changes. (Neutral)

Fundamentals: The NDRC and two other departments: firmly resist disorderly "price wars" and promote the construction of a market order characterized by quality and fair competition. Efforts will be made to strengthen cost investigations and price monitoring, increase regulatory and law enforcement efforts, reinforce product production consistency inspections, and deal with non-compliant enterprises according to the law, promoting high-quality development in the automotive industry. Regarding aluminum semis exports, according to General Administration of Customs data, unprocessed aluminum and aluminum semis exports in December 2025 were 545,000 mt, up 7.7% YoY from December 2024. Cumulative exports for 2025 were 6.134 million mt, down 8% YoY from 2024.

Primary Aluminum Market: During the morning session, the SHFE aluminum 2602 contract fluctuated upward, with the price center higher than the previous trading day. High aluminum prices suppressed downstream purchasing demand, and overall buyer transaction sentiment declined MoM from the previous trading day. Mainstream transaction prices mainly concentrated between a discount of 300 yuan/mt and 20 yuan/mt. On Wednesday, the sales sentiment index in the east China market was 2.44, down 0.15 WoW; the purchasing sentiment index was 2.29, down 0.2 WoW. SMM A00 aluminum closed at 24,670 yuan/mt, up 370 yuan/mt from the previous trading day, at a discount of 80 yuan/mt against the 2601 contract, down 20 yuan/mt from the previous trading day; at a discount of 180 yuan/mt against the 2602 contract. On Wednesday, trading sentiment in the central China market continued to recover. As the premium/discount narrowed, trading firms engaging in both spot and futures market significantly increased their willingness to sell. Major holders sold off at low prices, but with high absolute aluminum prices, downstream processing enterprises maintained just-in-time procurement, and demand remained weak. Traders held prices firm, and the actual transaction price in the central China market eventually ranged from a discount of 20 yuan/mt to parity against the central China price, with a slight increase in trading volume. On Wednesday, the sales sentiment index in the central China market was 2.61, up 0.02 WoW; the purchasing sentiment index was 1.52, up 0.01 WoW. SMM central China closed at 24,510 yuan/mt, up 370 yuan/mt from the previous trading day, at a discount of 240 yuan/mt against the 2601 contract, down 20 yuan/mt from the previous trading day; at a discount of 340 yuan/mt against the 2602 contract. The price difference between Henan and Shanghai was -160 yuan/mt, flat from the previous trading day.

Secondary Aluminum Raw Materials:On Wednesday, spot primary aluminum prices rose again from the previous trading day, with SMM A00 spot closing at 24,670 yuan/mt, and aluminum scrap market prices followed the increase overall. Supply side, environmental protection-driven production restrictions were lifted in central China, but inventory levels of wrought aluminum alloy scrap remained saturated. Demand side, the "price without market" characteristic became prominent, with downstream resistance to high prices strong, mostly purchasing as needed or digesting inventories. Some enterprises planned to halt production early, and expectations for Chinese New Year stockpiling weakened. On Wednesday, baled UBC was quoted at 17,900-18,300 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was quoted at 19,550-20,050 yuan/mt (ex-tax). 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 4,373 yuan/mt on January 14, and the price difference between A00 aluminum and shredded aluminum tense scrap was 3,029 yuan/mt. The aluminum scrap market is expected to fluctuate at highs this week, with shredded aluminum tense scrap (priced based on aluminum content) mainstream range at 18,900-19,600 yuan/mt (ex-tax). 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 sources of scrap are unlikely to change in the short term. The suppressing effect on the demand side intensifies. As the Chinese New Year approaches, enterprises are gradually entering holiday schedules, the operating rate of secondary aluminum producers will further decline, the scope of production cuts and halts by downstream enterprises will expand, and stocking demand is unlikely to provide effective support. Overall, the tug-of-war between sellers and buyers continues. Close attention should be paid to the trend of primary aluminum, the progress of downstream production halts, and pre-holiday trading activity, while remaining vigilant against high-price correction risks.

Secondary Aluminum Alloy: Aluminum prices continued their strength on Wednesday, with the secondary aluminum market showing clear sentiment to follow the rise. The SMM ADC12 price increased by 250 yuan/mt to 24,200 yuan/mt. However, the market's characteristic of "price without market" remained prominent, with actual transactions dominated by rigid demand and downstream acceptance of high prices being limited. From the perspective of market drivers, cost support and a tight supply-demand pattern provide a floor for aluminum prices, but weak demand is constraining further price increases. Overall, bolstered by short-term macro tailwinds, the ADC12 price is expected to maintain a pattern of fluctuating at highs. The market is currently intertwined with bullish and bearish factors, requiring close attention to changes in the supply-demand pattern and macro policy direction.

Aluminum Market Summary: Overall, the macro front remains strong recently. The logic of a monetary easing cycle driven by expectations for US Fed interest rate cuts remains unchanged, continuously supporting nonferrous metal prices. After copper prices hit a record high, funds have shifted to the relatively undervalued aluminum market, creating a catch-up rally. The dual catalysts of monetary easing and new consumption policies have both boosted risk appetite in the commodity market and solidified demand expectations, resonating with overseas factors to further consolidate the foundation for rising aluminum prices. Fundamentally, demand is significantly impacted by the dual effects of high price suppression and environmental protection-driven production restrictions, with end-use consumption showing signs of seasonal weakness. The current reality of pressured fundamental consumption and accumulating social inventory is imposing some restraint on sustained aluminum price increases. However, strong macro policy expectations and geopolitical risk disruptions continue to provide solid support, and aluminum prices are expected to mainly fluctuate at high levels.

[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 their own independent judgment. Any decisions made by clients are unrelated to SMM.]