Bullish sentiment cools down Aluminum prices under pressure [SMM Aluminum Weekly Review]

SMM December 22 News:

From a macro perspective, overseas risk aversion sentiment pulled back, while domestic macro sentiment improved. By region, overseas, friction between the US and Europe over Greenland escalated, once raising concerns about a US-Europe split. Subsequently, US President Trump announced that a framework agreement on the Greenland issue had been reached with NATO Secretary General Rutte, and stated that the tariff measures originally scheduled to take effect on February 1 would not be implemented, leading to a de-escalation of US-Europe tensions and a pullback in market risk aversion sentiment. Domestically, a relevant official from the National Development and Reform Commission (NDRC) stated that 2026 macro policies should focus the driving force 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 and comprehensively addressing "involutionary" competition.

Fundamentals side, Supply side, domestic and Indonesian aluminum projects steadily ramped up production, with daily average production continuing to increase; production is expected to maintain its rising trend in the short term. Demand side, recent aluminum price fluctuations narrowed, and the market gradually entered a stabilizing phase. Supported by downstream orders on hand, the operating rate of processing enterprises saw a slight rebound compared to the previous period. Warehouse withdrawals of aluminum ingots in major consumption areas this week were up YoY, and the pace of inventory buildup moderated. Social inventory saw a slight buildup of 2,000 mt compared to last Thursday, up YoY. This week's SMM weekly proportion of liquid aluminum was recorded at 74.9%, down 0.44 percentage points WoW.

Overall, bullish sentiment in nonferrous metals cooled down, coupled with fundamental risks from high inventory, aluminum prices were in the doldrums during the week. Affected by the downward shift in the price center, the SMM A00 aluminum premiums and discounts this Thursday were -150 yuan/mt, narrowing by about 30 yuan/mt YoY. The easing of macro risk sentiment provided phased bottom support for aluminum prices, but upside was limited due to pressure from high inventory. SHFE aluminum is expected to be in the doldrums next week, trading within a range of 23,600-24,200 yuan/mt. As of this Wednesday, LME aluminum ingot registered warrants reached 480,000 mt, an increase of about 36,000 mt YoY; LME aluminum encountered resistance to rising and is expected to trade within a range of $3,080-$3,180/mt.