Macro Sentiment Mixed with Long and Short Factors, Fundamental Performance Remains Unchanged [SMM Aluminum Morning Meeting Minutes]

1.16 SMM Morning Meeting Summary

Futures: On January 15, the SHFE aluminum 2603 contract opened at 24,470 yuan/mt during the night session. After opening, the price pulled back, reaching a low of 24,015 yuan/mt, then entered consolidation without breaking the opening price, finally closing at 24,320 yuan/mt, down 0.23%. Trading volume was 285,000 lots, and open interest was 348,000 lots. From a technical analysis perspective, the fast RSI1 line is at 49.88, having fallen below the 50 strength-weakness dividing line; the slow RSI2 line is at 58.43, also in a pullback, indicating that short-term bullish momentum has weakened. Although the MA moving average system still shows a bullish formation, the 5-day and 10-day moving averages are exerting some pressure on night session prices, suggesting a short-term adjustment phase. LME aluminum opened at $3,187/mt, hit a low of $3,136/mt, and closed at $3,171.5/mt. Trading volume was 29,400 lots, an increase of 828 lots, and open interest was 705,000 lots, an increase of 11,900 lots.

Macro front: US Fed official Schmid stated that he sees little reason for an interest rate cut at present. The current policy stance does not seem very restrictive. A rate cut could undermine the process of curbing inflation without benefiting the labour market (neutral). US President Trump said he has decided to temporarily refrain from imposing tariffs on rare earths, lithium, and other critical minerals, instead ordering his government to seek supplies from international trading partners. This has somewhat cooled the bullish sentiment on silver, copper, and aluminum (neutral).

Fundamentals: This week, the weekly operating rate of downstream enterprises was 60.2%. High aluminum prices have become the core factor inhibiting downstream consumption and industry recovery. The operating rate of leading enterprises in aluminum plate/sheet, strip and foil slightly increased MoM, with seasonal demand warming up for can stock, food packaging foil, and pharmaceutical foil. However, procurement pressure for low and mid-end products has significantly delayed stockpiling plans. In terms of inventory, national social inventory of aluminum ingot increased by 22,000 mt compared to last Thursday, and the inventory of aluminum billet in major consumption areas increased by 36,500 mt, showing no significant improvement in fundamentals.

Primary aluminum market: In the morning session, the SHFE aluminum 2602 contract fluctuated downward, with the price center lower than the previous trading day. Affected by the decline in aluminum prices, overall purchasing sentiment among downstream players has recovered, with mainstream transaction prices mainly concentrated between a discount of 20 yuan/mt and 10 yuan/mt. On Thursday, the east China market's shipping sentiment index was 2.56, up 0.12 WoW; the purchasing sentiment index was 2.44, up 0.15 WoW. SMM A00 aluminum closed at 24,190 yuan/mt, down 480 yuan/mt from the previous trading day, at a discount of 130 yuan/mt against the 2601 contract, down 50 yuan/mt from the previous trading day; and at a discount of 190 yuan/mt against the 2602 contract. On Thursday, aluminum prices pulled back, while trading sentiment in the central China market continued to recover. Large buyers stepped in to purchase, driving up trading volume and pushing premiums and discounts higher. Suppliers showed increased willingness to sell, and market activity improved. The actual transaction prices in the central China market ultimately ranged from a discount of 10 yuan/mt to a premium of 10 yuan/mt against the central China price. On Thursday, the selling sentiment index for the central China market was 2.60, down 0.01 WoW; the purchasing sentiment index was 1.95, up 0.44 WoW. The SMM central China price closed at 24,030 yuan/mt, down 480 yuan/mt from the previous trading day, at a discount of 290 yuan/mt against the 2601 contract (down 50 yuan/mt from the previous trading day), and at a discount of 350 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 Thursday, spot primary aluminum prices pulled back compared to the previous trading day, with the SMM A00 spot price closing at 24,190 yuan/mt. Aluminum scrap prices generally followed the decline. Supply side, environmental protection-driven production restrictions were lifted in central China, but inventories of wrought aluminum alloy scrap remained saturated. Demand side, the characteristic of "nominal prices without actual transactions" became prominent, with downstream users showing strong resistance to high prices, mostly purchasing as needed or digesting inventories. Some enterprises planned to halt production early, and expectations for Chinese New Year stockpiling weakened. On Thursday, baled UBC was centrally quoted at 17,500-17,900 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was centrally quoted at 19,250-19,750 yuan/mt (ex-tax). 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 3,903 yuan/mt on January 15, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,666 yuan/mt. The aluminum scrap market is expected to hover at highs this week and maintain high fluctuations next week, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) forecast at 19,600-20,100 yuan/mt (ex-tax). High primary aluminum prices will provide bottom support for aluminum scrap, but the situation of losses continues to intensify, forcing downstream enterprises to further expand production cuts and halts. Weak stocking demand limits the upside potential. Overall, the tug-of-war between sellers and buyers persists, requiring close monitoring of primary aluminum price trends, the progress of downstream production halts, and pre-holiday transaction conditions, while remaining vigilant against the risk of a pullback from highs.

Secondary Aluminum Alloy:Futures side, the aluminum alloy 2603 contract opened at 23,455 yuan/mt on Thursday. The futures chart showed a "V"-shaped fluctuation pattern, with the lowest point at 22,905 yuan/mt and the highest at 23,455 yuan/mt. It finally closed at 23,155 yuan/mt, down 270 yuan/mt or 1.15% from the previous close. Bulls mainly reduced their positions. Spot market, aluminum prices saw a significant correction on Thursday. The A00 price fell by 480 yuan/mt to 24,190 yuan/mt, and the SMM ADC12 price dropped by 200 yuan/mt to 24,000 yuan/mt. After multiple days of consecutive gains, aluminum prices cooled down but remained above the 24,000 yuan/mt high level. Demand side, the price decline intensified the wait-and-see sentiment among downstream enterprises. Although some die-casting enterprises were forced to restock to maintain production, boosting market inquiry activity this week and leading to a marginal improvement in purchase willingness, actual transactions remained sluggish due to losses in production profits for some downstream enterprises, with orders for some secondary aluminum plants showing a significant decline. In the short term, secondary aluminum alloy prices are expected to continue fluctuating at highs. On one hand, cost support has weakened, coupled with the dual pressures of the off-season and losses suppressing downstream demand, resulting in a sluggish market trading atmosphere; on the other hand, uncertainty in regional tax policies, rigid supply constraints from environmental protection-driven production restrictions, and support from macro tailwinds continue to provide a floor for prices.

Aluminum Market Summary:Macro sentiment was mixed, with domestic macro bullish sentiment remaining strong; overseas, expectations for a US Fed interest rate cut in January declined; Trump announced a decision to temporarily suspend tariffs on some critical minerals, cooling bullish sentiment among funds for varieties such as silver, copper, and aluminum. On the demand side, current fundamental consumption is under pressure, with high aluminum prices being the core factor inhibiting downstream consumption and a rebound in industry operating rates, while social inventories of aluminum ingots and billets continued to accumulate. Overall, macro news is currently mixed, and fundamentals appear relatively weak in the short term, but funds' bullish sentiment toward aluminum futures prices has not completely cooled, and aluminum prices are expected to maintain high fluctuations.

[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 as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]