Risks of trade friction between Europe and the U.S. continue to escalate, and aluminum prices are expected to fluctuate upward in the short term [SMM Aluminum Morning Meeting Summary]

January 20 SMM Morning Conference Minutes

Futures:Yesterday, SHFE aluminum night session closed at 24,225 yuan/mt, up 1.06%. Prices fluctuated upward above all key moving averages (MA5 24,221, MA10 24,126.5), with short-term moving averages beginning to diverge upward, indicating a significant technical strengthening. The MACD lines were above the zero axis (DIF 3.6179, DEA 3.3802), and the histogram turned positive (0.4753), though its limited length suggests that bullish momentum is recovering but has not yet entered a strong state. The core trading range for SHFE aluminum is suggested at 23,750-24,250 yuan/mt. LME aluminum night session closed at $3,165.5/mt, up 1.12%. Prices held up well above all short-term moving averages (MA5 3,165.5, MA60 3,164.62). The MACD lines were near the zero axis (DIF 0.2227, DEA 0.0910), and the histogram turned positive (0.2633), indicating bearish momentum is weakening, with signs of a short-term shift to bullishness. The core trading range for LME aluminum is suggested at $3,140-3,200/mt.

Macro Front:According to preliminary calculations by the National Bureau of Statistics (NBS), China's GDP grew 5% YoY in 2025, reaching 140.19 trillion yuan, with Q4 growth at 4.5%. Value-added industrial output from large enterprises increased 5.9% YoY, and the manufacturing sector remained the world's largest. (Bullish★); The EU will hold an emergency summit on January 22 to discuss issues including US President Trump's announcement of imposing additional tariffs on European countries opposing the US acquisition of Greenland, and to assess potential countermeasures by the EU. Previous reports indicated the EU is preparing to impose retaliatory tariffs on US goods valued at 93 billion euros. (Bearish★)

Fundamentals:Supply side, newly commissioned aluminum projects in China and Indonesia continued ramping up production, with the daily average production further increasing. Demand side, last week's downstream weekly operating rates overall remained relatively weak, 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 the peak consumption season, initiating pre-holiday stockpiling. However, high prices continued to suppress demand, and amid the traditional off-season, the proportion of liquid aluminum in aluminum production continued its downward trend this week, down 0.21 percentage points MoM, with fundamental performance still showing no significant improvement.

Primary Aluminum Market:In the early session, the SHFE aluminum 2602 contract traded with volatility, with the price center lower than the previous trading day. Influenced by the decline in aluminum prices, overall downstream purchasing sentiment recovered somewhat. Mainstream transaction prices were mainly concentrated at a premium of 10 yuan/mt to 30 yuan/mt. This Monday, the East China market selling sentiment index was 2.84, up 0.23 WoW; the buying sentiment index was 2.71, up 0.16 WoW. SMM A00 aluminum closed at 23,870 yuan/mt, down 160 yuan/mt from the previous trading day, at a discount of 160 yuan/mt against the 2602 contract, up 20 yuan/mt from the previous trading day. Trading activity in the central China market continued to recover this Monday. Although downstream plants mainly purchased based on rigid demand with slight restocking, large traders actively purchased, leading to faster circulation of spot cargo. Holders held prices firm and were reluctant to sell, pushing market prices higher. Ultimately, actual transaction prices in the central China market rose throughout the day, ranging from a discount of 10 yuan to a premium of 20 yuan against the central China price. The selling sentiment index in the central China market was 2.67 this Monday, flat WoW; the buying sentiment index was 2.27, up 0.03 WoW. SMM central China price closed at 23,740 yuan/mt, down 140 yuan/mt from the previous trading day, at a discount of 290 yuan/mt against the 2602 contract, up 40 yuan/mt from the previous trading day. The Henan-Shanghai price spread was -130 yuan/mt, narrowing by 20 yuan/mt from the previous trading day.

Aluminum Scrap:Spot primary aluminum prices pulled back this Monday compared to the previous trading day, with SMM A00 spot aluminum closing at 23,870 yuan/mt. The aluminum scrap market followed the decline in primary aluminum prices. This Monday, baled UBC was mainly offered at 17,200-17,700 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was mainly offered at 19,100-19,600 yuan/mt (ex-tax). Prices in Shanghai, Zhejiang, Jiangsu, Tianjin, Shandong, and other regions fell by 100-200 yuan/mt this Monday. 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 3,583 yuan/mt on January 8, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,454 yuan/mt. Against the backdrop of high aluminum prices forcing scrap prices to follow, a situation of "nominal prices with no actual transactions" has emerged, dampening downstream buying sentiment, leading to purchasing as needed. On the other hand, the National Committee for Disaster Prevention, Mitigation, and Relief decided to initiate a Level IV emergency response for low-temperature, rain, snow, and freezing disasters in four provinces—Anhui, Henan, Hunan, and Guizhou—starting at 18:00 on January 18. Scrap utilization enterprises in the relevant provinces and cities are experiencing some impact on the efficiency of aluminum scrap collection and delivery due to the rain and snow weather. The aluminum scrap market is expected to hover at highs this week. Shredded aluminum tense scrap (priced based on aluminum content) is forecast to trade mainly within the range of 19,600-20,100 yuan/mt (ex-tax) next week. High primary aluminum prices will provide bottom support for scrap, but the ongoing losses are intensifying, forcing downstream enterprises to further expand production cuts and suspensions, while weak stocking demand limits the upside. The overall tug-of-war between sellers and buyers continues, requiring close monitoring of primary aluminum trends, the pace of downstream shutdowns, 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 22,750 yuan/mt this Monday, with the futures price generally fluctuating around the 22,800 yuan/mt level intraday. It hit a high of 22,920 yuan/mt and a low of 22,730 yuan/mt, ultimately closing at 22,890 yuan/mt, up 155 yuan/mt or 0.68% from the previous close. Bears mainly reduced their positions, as bearish forces retreated from previous levels, further supporting the bullish structure. However, risks of weakening upward momentum due to declining open interest warrant caution. In the spot market, aluminum prices continued to correct on Monday, with the A00 price falling another 160 yuan/mt to 23,870 yuan/mt, while the SMM ADC12 price held steady at 23,900 yuan/mt. The secondary aluminum market was supported by firm costs, low inventory, and bullish expectations, leading most producers to maintain stable offers and adopt a wait-and-see approach. On the demand side, wait-and-see sentiment intensified due to falling aluminum prices. Although some die-casting enterprises restocked due to rigid production needs, marginally boosting inquiry and purchase willingness, actual transactions remained sluggish amid losses downstream. Some enterprises have already reduced or halted production, and pre-holiday stockpiling was weak. In the short term, secondary aluminum alloy prices are expected to hover at highs. On one hand, cost support has weakened somewhat, coupled with dual pressures from the off-season and losses, leading to sluggish market activity. On the other hand, uncertainties in regional tax policies and supply tightness due to environmental protection-driven production restrictions, along with macro tailwinds, continue to provide solid bottom support for prices. In the import market, overseas ADC12 offers remain firm, holding steady at $2,860–2,890/mt, with import arbitrage profits near 300 yuan/mt.

Aluminum Market Summary:On the macro front, China's 2025 GDP grew 5% YoY and industrial value-added above designated size showed steady growth, providing macroeconomic underpinning for aluminum's end-use demand from both economic aggregate and industrial activity perspectives, constituting medium and long-term bullish support. However, risks from Europe-US trade frictions continue to escalate, with the EU emergency summit evaluating countermeasures likely to intensify global trade tensions, negatively impacting aluminum demand expectations from risk sentiment and end-use product trade flow perspectives. Supply side, new aluminum capacity domestically and overseas continues to ramp up, with daily average production steadily increasing. Demand side shows structural divergence: primary alloy and aluminum plate/sheet, strip and foil industries saw operating rates rebound slightly due to year-end stockpiling and peak consumption season support, providing some rigid demand. However, high-price suppression and off-season effects persist, and the proportion of liquid aluminum declined MoM, indicating insufficient momentum for a broader recovery in end-use consumption, with no significant improvement overall. Overall, rising macro trade friction risks will suppress market sentiment, while fundamentals appear bearish amid clear supply increases, only partial demand recovery, and continuing inventory accumulation trends. However, bullish sentiment toward aluminum futures prices among investors 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 advice. Clients should make decisions cautiously and not use this to replace independent judgment. Any decisions made by clients are unrelated to SMM.]