Greenland Crisis Takes a Turn for the Better, Aluminum Prices Gain Support at a Phased Bottom [SMM Aluminum Morning Meeting Minutes]

January 22 SMM Morning Conference Minutes

Futures:Last night session, SHFE aluminum closed at 24,100 yuan/mt, up 0.77%. The price stood above all key moving averages (MA5: 24,086; MA60: 24,083.08), with short-term MAs forming a bullish alignment, indicating a strong structure. In the MACD indicator, the DIF (0.9315) crossed above the DEA (-0.8008), and the histogram turned positive (0.2614), suggesting strengthening bullish momentum. The core trading range for SHFE aluminum is suggested at 23,900-24,400 yuan/mt. LME aluminum closed at $3,117.5/mt in the night session, edging down 0.03%. The price fluctuated around the moving averages, slightly below the MA30 ($3,119.52) and MA60 ($3,120.52), facing short-term pressure. Both MACD lines remained below the zero axis (DIF: -0.7246; DEA: -0.6110), with a negative histogram (-0.2272), indicating the bearish pattern persisted. Market wait-and-see sentiment was thick. The core trading range for LME aluminum is suggested at $3,090-3,150/mt.

Macro Front:The Greenland crisis took a turn for the better. US President Trump announced that a framework agreement on the Greenland issue had been reached with NATO Secretary General Rutte. If this plan is ultimately implemented, it will greatly benefit the US and all NATO member states. Trump stated that the tariff measures originally scheduled to take effect on February 1 would not be implemented. (Bullish ★) The latest survey showed that most economists expected the US Fed to keep the benchmark rate unchanged this quarter and likely remain on hold until the term of Fed Chairman Powell ends in May. This view marked a significant shift from the previous month, when most respondents still expected at least one interest rate cut before March. However, most economists still projected at least two rate cuts later this year. (Neutral ★)

Fundamentals:Supply side, newly commissioned aluminum projects in China and Indonesia continued ramping up production, increasing the daily average production. 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 demand support. For plate/sheet, strip and foil, downstream can stock and food packaging were in their peak consumption season, initiating pre-holiday stockpiling. However, pressured by high prices and 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 no significant improvement in fundamental performance.

Primary Aluminum Market:In the morning session, SHFE aluminum 2602 fluctuated upward, with the price center slightly higher than the previous trading day. This Wednesday, overall market trading sentiment improved slightly but remained at a low level. Mainstream transaction prices were mainly concentrated between a discount of 10 yuan/mt and a premium of 10 yuan/mt. On Wednesday, the sales sentiment index in the east China market was 2.89, up 0.04 WoW, while the purchase sentiment index was 2.46, up 0.03 WoW. SMM A00 aluminum was quoted at 23,710 yuan/mt, up 30 yuan/mt from the previous trading day, at a discount of 150 yuan/mt against the 2602 contract, up 10 yuan/mt from the previous trading day. On Wednesday, the buying sentiment in the central China market slightly increased compared to the previous day. Although downstream processing enterprises reduced production by about 20% due to environmental protection-related controls, the blizzard in Henan province ended and road transport gradually resumed, leading to a slight improvement in overall buying sentiment. Due to the incomplete recovery of aluminum plant shipments, suppliers raised prices to sell. On Wednesday, the actual transaction price in the central China market hovered around a premium of 10 yuan/mt to 40 yuan/mt over the central China price. On Wednesday, the sales sentiment index in the central China market was 2.68, unchanged WoW; the purchase sentiment index was 2.21, up 0.02 WoW. SMM central China closed at 23,610 yuan/mt, up 50 yuan/mt from the previous trading day, at a discount of 250 yuan/mt against the 2602 contract, up 30 yuan/mt from the previous trading day. The Henan-Shanghai price difference was -100 yuan/mt, narrowing 20 yuan/mt from the previous trading day.

Secondary aluminum raw materials: On Wednesday, spot primary aluminum prices fluctuated rangebound compared to the previous trading day, with SMM A00 spot closing at 23,710 yuan/mt, and the aluminum scrap market followed the decline in primary aluminum prices. On Wednesday, baled UBC aluminum scrap was centrally quoted at 17,150-17,650 yuan/mt (excluding tax), and shredded aluminum tense scrap (priced based on aluminum content) was centrally quoted at 19,200-19,700 yuan/mt (excluding tax). In terms of the price difference between A00 aluminum and aluminum scrap, on January 21, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,530 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap in Foshan was 2,509 yuan/mt. Against the backdrop of high aluminum prices forcing aluminum scrap to follow the rise, a situation of "nominal prices without actual transactions" has emerged, dampening downstream buying sentiment and leading to purchasing as needed. On the other hand, the National Commission for Disaster Prevention and Mitigation decided to initiate a Level IV emergency response for low-temperature, rain, snow, and freezing disasters in four provinces—Anhui, Henan, Hunan, and Guise—at 18:00 on January 18. Due to rain and snow weather, scrap utilization enterprises in related provinces and cities were somewhat affected in terms of aluminum scrap collection and delivery efficiency. It is expected that the aluminum scrap market will hover at highs this week, with shredded aluminum tense scrap (priced based on aluminum content) projected to trade in the main range of 19,600-20,100 yuan/mt (excluding tax) next week. High primary aluminum prices will provide bottom support for aluminum scrap, but the persistent and intensifying losses continue to force downstream enterprises to further expand production cuts and shutdowns, while weak stocking demand limits the upside. The overall tug-of-war between sellers and buyers continues, and it is necessary to closely track the trend of primary aluminum, the progress of downstream shutdowns, and pre-holiday transaction conditions, while remaining vigilant against the risk of a high-price correction.

Secondary aluminum alloy: In the futures market, the aluminum alloy 2603 contract opened at 22,675 yuan/mt on Wednesday, maintaining a weak and rangebound pattern in the morning session, with the price dipping to a low of 22,600 yuan/mt during the session. In the afternoon, market sentiment recovered, and prices rose rapidly, hitting a high of 22,965 yuan/mt, finally closing at 22,895 yuan/mt, up 130 yuan/mt or 0.57% from the previous trading day. Bears mainly reduced their positions. Spot market, A00 aluminum price rebounded by 30 yuan/mt to 23,710 yuan/mt on Wednesday, while SMM ADC12 price held steady at 23,850 yuan/mt. Aluminum price rebounded slightly on Wednesday, but the secondary aluminum market showed weak willingness to adjust prices, maintaining an overall wait-and-see stance. In the afternoon, futures rose significantly, with some enterprises actively raising prices by 100 yuan/mt. Demand side, affected by fear of high prices and weak pre-holiday stockpiling momentum, procurement maintained a rigid pace, resulting in mediocre performance in transactions. Overall, short-term secondary aluminum alloy prices are expected to continue fluctuating at highs. Although the off-season and high aluminum prices have suppressed market activity, adverse weather conditions have hindered the flow of raw materials, coupled with uncertainty in regional tax policies and supply tightness caused by environmental protection-driven production restrictions, collectively providing bottom support for prices. Import market, overseas ADC12 offers remained stable at $2,860–2,890/mt, with import arbitrage profits hovering around 200 yuan/mt.

Aluminum Market Summary:Macro front, US President Trump announced a suspension of plans to impose additional tariffs on Europe, cooling trade friction risks between the US and Europe previously triggered by Greenland issues and easing market risk aversion sentiment. Expectations for US Fed interest rate cuts were delayed, and the pace of monetary policy easing was slower than previously anticipated, marginally weakening the boost from macro liquidity expectations on metal prices. Supply side, new 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 a slight rebound in operating rates supported by year-end stockpiling and peak consumption season, providing some rigid demand. However, high-price suppression and off-season effects persisted, with the proportion of liquid aluminum in aluminum production continuing to decline MoM, indicating insufficient momentum for a overall recovery in end-use consumption. Inventory pressure further intensified, showing no significant improvement overall. In summary, the easing of macro risk sentiment provided phased bottom support for aluminum prices, but the combination of loose supply, weak demand, and inventory accumulation on the fundamental side limited upside room for aluminum prices.

[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.]