Domestic Policy Support Fails to Mask Inventory Buildup Reality, Short-Term Aluminum Price Rise Faces Significant Resistance [SMM Aluminum Morning Meeting Minutes]

1.21 SMM Morning Meeting Minutes

Futures:Last night, SHFE aluminum closed at 23,775 yuan/mt, down 1.02%. The price was highly convergent with the MA5 (23,765), MA10 (23,764), MA30 (23,767.33), and MA60 (23,763.67), indicating a stalemate between long and short positions around key moving averages and a lack of clear direction. The core trading range for SHFE aluminum is suggested at 23,700-24,100. LME aluminum closed at $3,118.5/mt, down 1.48%. The price also fluctuated slightly around a highly convergent bundle of moving averages (MA5 3,119.8, MA60 3,118.56), showing a technically stagnant pattern. The MACD lines were near the zero axis (DIF 0.3491, DEA 0.0619), with a positive histogram (0.5744), but the momentum was weak. The core trading range for LME aluminum is suggested at 3,120-3,190.

Macro Front:An official from the National Development and Reform Commission (NDRC) stated that macro policies in 2026 will focus on strengthening the domestic circulation and comprehensively expanding domestic demand. This includes optimizing the support scope and subsidy standards for the program of large-scale equipment upgrades and consumer goods trade-ins; researching and formulating an implementation plan for the strategy to expand domestic demand, and studying the formulation of a plan to increase urban and rural residents' incomes; researching the establishment of a national-level mergers and acquisitions fund, and planning and promoting a number of landmark and leading major high-tech industrial projects for the 15th Five-Year Plan period; researching and formulating regulations for building a unified national market, and comprehensively addressing "involutionary" competition. (Bullish ★); The European Parliament announced the freezing of the approval process for the trade agreement reached with the US last July. This is seen as the EU's first response to Trump's latest pressure tactics. Trump previously threatened to impose additional tariffs on eight European countries until an agreement is reached on the US "purchasing Greenland." (Bearish ★)

Fundamentals:Supply side, newly commissioned aluminum projects in China and Indonesia continued to ramp up production, with the daily average production increasing further. Demand side, last week's downstream weekly operating rates overall remained relatively weak, but the 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 coupled with the traditional off-season, the proportion of liquid aluminum in aluminum production continued its downward trend this week, down 0.21 percentage point WoW. The fundamental performance still showed no significant improvement.

Primary Aluminum Market:In the early session, the SHFE aluminum 2602 contract weakened, with the price center lower than the previous trading day. On Tuesday, overall market turnover remained weak due to weaker purchasing sentiment. Mainstream transaction prices were mainly concentrated between a discount of 10 yuan/mt and a premium of 10 yuan/mt. On Tuesday, the sales sentiment index in the east China market was 2.85, up 0.01 MoM, while the purchasing sentiment index was 2.44, down 0.27 MoM. SMM A00 aluminum closed at 23,680 yuan/mt, down 190 yuan/mt from the previous trading day, at a discount of 160 yuan/mt against the 2602 contract, flat from the previous day. During the night session and early trading, aluminum prices rebounded. However, heavy snow in many parts of Henan disrupted transportation, affecting shipments from aluminum plants and purchases by downstream buyers. Demand from processing enterprises weakened. In the central China market, traders' purchasing sentiment declined significantly compared to the previous day, while trading firms engaging in both spot and futures markets and suppliers sold on price rallies. Market supply was ample, and traders showed weak willingness to hold prices firm. Eventually, the actual transaction price in the central China market weakened from a premium of 30 yuan/mt to the central China price before the market opened to a discount of 10 yuan/mt, with transaction volume down from the previous day. On Tuesday, the sales sentiment index in the central China market was 2.68, up 0.01 MoM, while the purchasing sentiment index was 2.19, down 0.08 MoM. SMM central China price closed at 23,560 yuan/mt, down 180 yuan/mt from the previous trading day, at a discount of 280 yuan/mt against the 2602 contract, up 10 yuan/mt from the previous day. The price spread between Henan and Shanghai was -120 yuan/mt, narrowing by 10 yuan/mt from the previous day.

Secondary Aluminum Raw Materials:On Tuesday, spot primary aluminum prices pulled back compared to the previous trading day, with SMM A00 aluminum closing at 23,680 yuan/mt. The aluminum scrap market followed the decline in primary aluminum prices. On Tuesday, baled UBC was quoted in a range of 17,150-17,650 yuan/mt (tax excluded), while shredded aluminum tense scrap (priced based on aluminum content) was quoted in a range of 18,900-19,400 yuan/mt (tax excluded). Prices in Shanghai, Zhejiang, Jiangsu, Tianjin, and Shandong fell by 100-200 yuan/mt on Tuesday. In terms of the price difference between primary aluminum and scrap, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,510 yuan/mt on January 20, while the price difference between A00 aluminum and shredded aluminum tense scrap was 2,489 yuan/mt. Against the backdrop of high aluminum prices forcing scrap prices to follow, the market has shown a situation of "nominal prices with no actual transactions." Downstream purchasing sentiment cooled significantly, with buyers 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, snow, and freezing disasters in four provinces—Anhui, Henan, Hunan, and Guizhou—at 18:00 on January 18. Scrap utilization enterprises in the relevant provinces and cities were somewhat affected in terms of scrap aluminum collection and delivery efficiency due to the snowy weather. According to the latest customs data, China's aluminum scrap imports in December 2025 were approximately 162,800 mt, up about 25% YoY. In terms of import sources, the main countries and regions for aluminum scrap imports in December were Thailand, the UK, Japan, and the US, with Thailand accounting for 23.3% of total imports. The aluminum scrap market is expected to hover at highs this week, with shredded aluminum tense scrap (priced based on aluminum content) forecast to trade in a mainstream range of 19,600-20,100 yuan/mt (tax excluded) next week. Primary aluminum prices fluctuating at highs provided bottom support for aluminum scrap, but the persistent and intensifying losses forced downstream enterprises to further expand production cuts and shutdowns, while sluggish stocking demand capped the upside. The tug-of-war between sellers and buyers continued, requiring close monitoring of primary aluminum price trends, the progress of downstream shutdowns, and pre-holiday transaction activity, with caution against the risk of a high-level correction.

Secondary Aluminum Alloy:Futures side, the aluminum alloy 2603 contract opened at 22,910 yuan/mt on Tuesday, fluctuated downward in the morning session and hit a bottom of 22,575 yuan/mt, then bottomed out, reaching an intraday high of 22,960 yuan/mt, and finally closed at 22,765 yuan/mt, down 145 yuan/mt or 0.63% from the previous close, mainly driven by bulls reducing positions. Spot market side, A00 aluminum price fell 190 yuan/mt to 23,680 yuan/mt on Tuesday, while the SMM ADC12 price dropped 50 yuan/mt to 23,850 yuan/mt. Aluminum prices experienced "four consecutive declines", but supported by limited cost declines due to tight raw materials, low finished product inventories, and bullish expectations, although manufacturers' offers diverged, most held steady or lowered prices slightly by around 100 yuan/mt, with overall performance remaining firm. Downstream demand side, affected by fear of high prices and weak pre-holiday stockpiling momentum, procurement maintained a rigid pace, resulting in mediocre trading performance. Overall, secondary aluminum alloy prices are expected to continue fluctuating at highs in the short term. Seasonal off-season and high aluminum prices suppressed market activity, but uncertainty in regional tax policies and supply tightness due to environmental protection-driven production restrictions still provided bottom support for prices. Import market, current overseas ADC12 offers remained firm, temporarily stable at $2,860–2,890/mt, with import instant profits around 300 yuan/mt.

Aluminum Market Summary:Macro front, domestically, the NDRC clarified that 2026 will see comprehensive efforts to expand domestic demand, through optimizing the program of large-scale equipment upgrades and consumer goods trade-ins, establishing national-level M&A funds, and promoting high-tech industry projects, providing solid medium and long-term support for aluminum consumption; escalated EU-US trade friction risks, with the European Parliament freezing approval of a trade agreement with the US in retaliation against tariff threats, increased uncertainty in the global trade environment. Supply side, newly commissioned aluminum capacity domestically and overseas continued to ramp up, with daily average production steadily increasing. Demand side showed structural divergence: primary alloy and aluminum plate/sheet, strip and foil industries saw operating rates slightly rebound supported by year-end stockpiling and peak consumption season, providing some rigid demand; however, high-price suppression and seasonal off-season effects persisted, the proportion of liquid aluminum continued to decline MoM, indicating insufficient momentum for overall end-use consumption recovery, and inventory pressure further intensified, with no significant overall improvement. Overall, although domestic macro policy support expectations provided downside support for aluminum prices, the combination of loose fundamentals, weak demand, and inventory accumulation constituted bearish factors, coupled with sentiment suppression from EU-US trade friction risks, suggesting significant short-term resistance to aluminum price rises.

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