Macro Sentiment Slows Down but Risks Remain, Aluminum Prices Maintain in the Doldrums in the Short Term [SMM Aluminum Morning Meeting Minutes]

January 23 SMM Morning Meeting Minutes

Futures:Last night, SHFE aluminum closed at 24,070 yuan/mt, up 0.21%. The price traded below the MA10 (24,224), facing short-term resistance near the moving average; however, it hovered around the MA5 (24,064) and remained well above the MA60 (22,483), indicating a solid medium and long-term trend structure. In the MACD indicator, the DIF (461.6143) and DEA (533.2012) maintained a high-level dead cross, with the histogram negative (-143.1738), suggesting the correction is not over. The core trading range for SHFE aluminum is suggested at 23,800-24,200. LME aluminum closed at $3,137.5/mt, up 0.64%. The price was under pressure below the MA10 (3,156.65) but managed to hold above the MA5 (3,133.9), indicating intense competition near short-term moving averages; medium and long-term, it remained firmly above the MA60 (2,941.98). The MACD lines flattened, and the negative histogram narrowed (-13.5259), indicating a slight weakening of downward momentum. The core trading range for LME aluminum is suggested at 3,120-3,160.

Macro Front:US President Trump stated that the ongoing Greenland agreement would grant the US "all the military access it wants." Trump also threatened "strong retaliation" if European countries sell off US assets due to tariff threats related to Greenland. Regarding the US Fed Chairman selection, Trump said an announcement would come soon, he has a candidate in mind, and interviews with candidates have concluded. (Neutral★) The US Q3 2025 GDP final estimate showed an annualized QoQ growth of 4.4%, higher than the initial 4.3%, marking the fastest growth in nearly two years. The Fed's preferred inflation gauge, the core PCE price index for November, rose 2.8% YoY and 0.2% MoM, both meeting expectations. (Neutral★)

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

Primary Aluminum Market:In the morning session, SHFE aluminum 2602 pulled back and then fluctuated with a rebound, with the price center slightly higher than the previous trading day. This Thursday, overall market trading sentiment improved slightly but remained at a relatively low level. Mainstream transaction prices were mainly in the range of a discount of 10 yuan/mt to a premium of 10 yuan/mt. On Thursday, the shipment sentiment index in the east China market was 2.93, up 0.04 WoW; the purchase sentiment index was 2.50, up 0.04 WoW. SMM A00 aluminum closed at 23,740 yuan/mt, up 30 yuan/mt from the previous trading day, at a discount of 150 yuan/mt against the 2602 contract, flat from the previous trading day. As the blizzard in Henan ended and road transport gradually recovered, trading in the central China market continued to recover, with downstream processing enterprises and traders showing stronger buying sentiment. Additionally, aluminum prices plunged rapidly after the market opened, driving premiums and discounts to hover at highs. The actual transaction price in the central China region finally ranged from parity to a premium of 30 yuan/mt against the central China price. On Thursday, the shipment sentiment index in the central China market was 2.70, up 0.02 yuan/mt WoW; the purchase sentiment index was 2.27, up 0.06 WoW. SMM central China closed at 23,650 yuan/mt, up 40 yuan/mt from the previous trading day, at a discount of 240 yuan/mt against the 2602 contract, up 10 yuan/mt from the previous trading day. The Henan-Shanghai price spread was -90 yuan/mt, narrowing by 10 yuan/mt from the previous trading day.

Secondary Aluminum Raw Materials:On Thursday, spot primary aluminum prices fluctuated rangebound compared to the previous trading day, with SMM A00 spot aluminum closing at 23,740 yuan/mt, while aluminum scrap prices held steady. Baled UBC scrap was mainly offered at 17,200-17,700 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was mainly offered at 19,200-19,700 yuan/mt (ex-tax). In terms of 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 3,560 yuan/mt on January 21, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,539 yuan/mt. Against the backdrop of high aluminum prices forcing scrap to follow suit, the market has shown a situation of "nominal prices without actual transactions," dampening downstream buying sentiment and leading to purchasing as needed. On the other hand, the National Commission for Disaster Prevention and Reduction 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 collection and delivery efficiency due to the snowy weather. The aluminum scrap market is expected to hover at highs next week, with shredded aluminum tense scrap (priced based on aluminum content) mainly ranging from 19,000 to 19,600 yuan/mt (ex-tax). Downward pressures remain: as the Chinese New Year approaches, enterprises are gradually entering holiday shutdowns, scrapyards closing early have reduced market liquidity, downstream operations remain sluggish, and resistance to high prices is strong. Close attention should be paid to primary aluminum price trends, weather changes, and pre-holiday shutdown progress, with vigilance against high-price correction risks.

Secondary Aluminum Alloy:Futures side, the aluminum alloy 2603 contract opened at 22,815 yuan/mt on Thursday, rose to a high of 22,870 yuan/mt, fell to a low of 22,655 yuan/mt, and finally closed at 22,855 yuan/mt, down 40 yuan/mt or 0.17% from the previous close, with bulls mainly reducing positions. Spot market, A00 aluminum prices rose again by 30 yuan/mt to 23,740 yuan/mt on Thursday, while SMM ADC12 prices held steady at 23,850 yuan/mt. Aluminum prices maintained a slight rebound, but secondary aluminum market participants showed weak willingness to adjust prices, keeping offers generally stable. Approaching the Chinese New Year, secondary aluminum enterprises gradually started raw material stocking plans. However, due to persistently high aluminum prices, market sentiment was dominated by wait-and-see, leading enterprises to only slightly increase raw material inventories. Demand side, affected by price-fear psychology and weak pre-holiday stocking demand, downstream procurement was primarily for rigid needs, resulting in sluggish market activity. Overall, secondary aluminum alloy prices are expected to continue fluctuating at highs in the short term. Although the seasonal off-season and high aluminum prices suppressed market activity, adverse weather conditions hindered raw material circulation, coupled with uncertainty in regional tax policies and supply tightness caused by environmental protection-driven production restrictions, collectively provided bottom support for prices. Import market, overseas ADC12 offers remained stable at $2,860–2,890/mt, with import arbitrage profits around 200 yuan/mt.

Aluminum Market Summary:Macro front, US President Trump's tough rhetoric on the Greenland agreement and threats of retaliation against Europe added uncertainty to geopolitical and trade relations, though these have not escalated into immediate risks; meanwhile, the upward revision of US Q3 GDP showed economic resilience, and core PCE inflation met expectations, easing market concerns about inflationary pressures. Supply side, domestic and Indonesian aluminum projects continued ramping up, with daily average production steadily increasing, sustaining the supply growth trend. Demand side showed signs of stabilization; after aluminum price fluctuations narrowed, operating rates at downstream processing enterprises rebounded slightly, and orders on hand supported warehouse withdrawals, which increased YoY, leading to a noticeable slowdown in inventory buildup speed. However, the continued decline in the proportion of liquid aluminum reflected still weak demand for liquid aluminum, indicating structural contradictions remain unresolved. Overall, eased macro risk sentiment provided phased bottom support for aluminum prices, but high inventory levels capped upside potential, leaving prices lacking strong upward momentum in the short term and likely to remain in the doldrums.

[The information provided is for reference only. This article does not constitute direct investment research or 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.]