SMM January 15:
Macro Perspective: Macro sentiment was mixed between long and short factors. Domestically, positive macro sentiment remained strong. The Ministry of Finance held a national video conference to promote a package of policies for fiscal and financial coordination to boost domestic demand, requiring financial departments at all levels to work with relevant departments and handling agencies to fully and accurately grasp the policy requirements, simplify processes, strengthen execution tracking, and effectively promote policy implementation. The central bank conducted 900 billion yuan in outright reverse repo operations on January 15, with a tenor of 6 months (181 days), continuing to inject liquidity into the market. Overseas, following the release of the US non-farm payrolls report, expectations for a US Fed interest rate cut in January declined, and the market widely believed the Fed would not cut rates in January. On Wednesday, Trump announced a decision to temporarily not impose tariffs on rare earths, lithium, and other critical minerals, cooling bullish sentiment among funds for silver, copper, aluminum, and other commodities.
Fundamentals: Supply side, newly commissioned aluminum projects in China and Indonesia continued to ramp up, with daily average production increasing further. Demand side, overall weekly operating rates for downstream sectors remained relatively weak this week, but operating rates for primary alloy and aluminum plate/sheet, strip and foil saw a slight rebound. Some primary alloy enterprises began year-end stockpiling, providing rigid support for demand. For plate/sheet, strip and foil, downstream can stock and food packaging are in their peak consumption season, initiating pre-holiday stockpiling. However, high prices were inhibitory and, coupled with the traditional off-season, the proportion of liquid aluminum continued its downward trend this week, down 0.21 percentage points WoW. Social inventory of aluminum ingots nationwide increased by 22,000 mt on Thursday compared to the previous Thursday, indicating no significant improvement in fundamentals.
Overall, current macro news is mixed, and fundamentals remain relatively weak in the short term, but bullish sentiment among funds for aluminum futures prices has not completely cooled. Aluminum prices are expected to hover at highs. The most-traded SHFE aluminum contract is forecast to trade between 23,800-25,000 yuan/mt next week, while LME aluminum is expected to trade between $3,080-3,200/mt.
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