Aluminum Prices Gain Support from Macro Tailwinds, Consolidating at High Levels in the Short Term [SMM Aluminum Morning Meeting Minutes]

January 26 SMM Morning Meeting Minutes

Futures:During the night session on January 23, the most-traded SHFE aluminum 2603 contract opened at 24,460 yuan/mt, reached a high of 24,510 yuan/mt, touched a low of 24,280 yuan/mt, and finally closed at 24,315 yuan/mt, up 25 yuan/mt or 0.10% from the previous close. Technically, the MA moving averages showed a divergent arrangement (MA5: 24,166.00 > MA10: 24,102.50 < MA20: 24,264.25 > MA40: 23,812.25), while the MACD 4-hour candlestick level continued to show green bars (DIFF: 141.90, DEA: 193.79), indicating that short-term adjustment momentum was still being released. In terms of open interest, night session open interest was approximately 340,000 lots, down 173 lots from the daytime session. LME aluminum opened at $3,140/mt, hit a high of $3,180.5/mt, a low of $3,129.5/mt, and finally settled at $3,173.5/mt, up 1.15% from the previous day. Trading volume was 28,500 lots, an increase of 6,402 lots, while open interest stood at 693,000 lots, up 4,028 lots.

Macro Front:The US Fed is scheduled to announce its interest rate decision on Wednesday, Eastern Time. The market believes there is a 95% probability that the Fed will keep rates unchanged at the January monetary policy meeting. Fed Chairman Powell will hold a monetary policy press conference. (Bullish ★) Mainly driven by geopolitical risk concerns, the US dollar index fell 0.81% overnight on Friday, closing at 97.48. On a weekly basis, the US dollar index declined, dropping 1.91% for the week, marking the largest weekly decline since May 2025. (Bullish ★)

Fundamentals:Supply side, domestic and Indonesian aluminum projects are steadily ramping up production, and output is expected to maintain an upward trend in the short term. Demand side, recent aluminum price fluctuations have narrowed, and the operating rate of processing enterprises has seen a slight rebound compared to the previous period. Last week, the comprehensive operating rate for aluminum processing recorded 60.9%, up 0.7 percentage points WoW, overall showing a pattern of stable operation coexisting with localized fluctuations. Inventory side, social inventory increased by 28,000 mt compared to last Monday and accumulated 34,000 mt compared to last Thursday.

Primary Aluminum Market:In the early session, the SHFE aluminum 2602 contract strengthened significantly, with the price center edging up slightly from the previous trading day. Last Friday, overall market selling sentiment improved slightly, but downstream buying sentiment remained relatively weak. Mainstream transaction prices were mainly at a discount of 10 yuan/mt to the average price. Last Friday, the selling sentiment index in the east China market was 2.96, up 0.03 WoW; the purchasing sentiment index was 2.47, down 0.03 WoW. SMM A00 aluminum was quoted at 24,110 yuan/mt, up 370 yuan/mt from the previous trading day, at a discount of 150 yuan/mt against the 2602 contract, unchanged from the previous trading day. Last Friday, selling sentiment in the central China market weakened somewhat, with some holders maintaining a bullish outlook and trading firms engaging in both spot and futures markets holding back from selling, leading to tight spot cargo availability. As it was the final day for January long-term contracts, traders showed strong purchase willingness, pushing market offers higher. However, actual transaction prices mainly ranged from parity with the central China price to a premium of 20 yuan/mt against it. The central China market selling sentiment index stood at 2.65 last Friday, down 0.05 WoW; the buying sentiment index was 2.32, up 0.05 WoW. The SMM central China price closed at 24,030 yuan/mt, up 380 yuan/mt from the previous trading day, at a discount of 230 yuan/mt against the 2602 contract, widening by 10 yuan/mt from the previous day. The Henan-Shanghai price spread was -80 yuan/mt, narrowing by 10 yuan/mt from the previous trading day.

Aluminum Scrap:Last Friday, spot primary aluminum prices rose significantly compared to the previous trading day, with the SMM A00 spot price closing at 24,110 yuan/mt. Aluminum scrap market prices followed the upward trend collectively. Last Friday, baled UBC was quoted in a range of 17,350-178,500 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was quoted in a range of 19,300-19,800 yuan/mt (ex-tax). 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 3,725 yuan/mt on January 23, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,919 yuan/mt. Against the backdrop of high aluminum prices forcing scrap prices to follow suit, the market has entered a state of "nominal prices with no real transactions," dampening downstream buying sentiment and leading to purchasing as needed. Next week, the aluminum scrap market is expected to fluctuate at highs, with shredded aluminum tense scrap (priced based on aluminum content) forecast to trade in a mainstream range of 19,200-19,800 yuan/mt (ex-tax). Downside pressures remain: as the Chinese New Year approaches, enterprises are gradually entering holiday shutdowns, scrapyards closing early reduce 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 production halts to guard against the risk of a high-price correction.

Secondary Aluminum Alloy:On the futures side, the aluminum alloy 2603 contract opened at 22,885 yuan/mt last Friday. The futures market fluctuated upwards overall during the day, touching a high of 23,095 yuan/mt and a low of 22,870 yuan/mt, finally closing at 22,995 yuan/mt, up 130 yuan/mt or 0.57% from the previous close, primarily driven by short covering. In the spot market, the A00 aluminum price rose sharply by 370 yuan/mt to 24,110 yuan/mt last Friday, while the SMM ADC12 price was raised by 150 yuan/mt to 24,000 yuan/mt. As the rebound in aluminum prices gained strength, secondary aluminum alloy quotations diverged: enterprises that held quotes steady during the price drop at the start of the week maintained stability during this price increase, while those that had previously adjusted quotes down with the market actively followed the rise, raising prices by approximately 200 yuan/mt. With the Chinese New Year approaching, secondary aluminum alloy enterprises are gradually starting raw material stockpiling. However, due to persistently high aluminum prices, market wait-and-see sentiment is strong, and enterprises are only increasing raw material inventory slightly. Demand side, affected by price fears and weak pre-holiday stocking demand, downstream procurement was mainly for rigid demand, and market trading atmosphere was sluggish. Supply side faced multiple disturbances: expectations of regional tax policy adjustments, enhanced compliance checks on reverse invoicing in some areas, transportation hindered by snowfall, and repeated environmental protection-driven production restrictions in regions like Central China, all prompted some enterprises to cut production or halt operations early for the holiday. The industry's operating rate is expected to show a downward trend in the short term. Looking ahead, although high aluminum prices and seasonal off-season demand suppress market activity, cost-side support from aluminum scrap prices, coupled with supply tightening due to policy and environmental factors, suggest that secondary aluminum alloy prices will continue to fluctuate at highs in the near term. Subsequent focus should be on raw material flow, changes in downstream operating rates, and the evolution of pre-holiday stocking sentiment.

Aluminum Market Summary:On the macro front, overseas factors such as friction between the US and NATO over Greenland, repeated policies like sanctions on Iran, market concerns over US Fed independence, and ongoing tariff uncertainties kept the US dollar under pressure. Meanwhile, the upward revision of US Q3 GDP confirmed economic resilience, and core PCE inflation data met market expectations, somewhat easing inflation worries. Domestically, 2026 macro policy clearly focuses on strengthening the domestic cycle by comprehensively expanding domestic demand to continuously release endogenous growth momentum. 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 stabilizing; after aluminum price fluctuations narrowed, downstream processing enterprises' operating rates rebounded slightly, supported by orders on hand, warehouse withdrawals increased YoY, and inventory buildup continued. The proportion of liquid aluminum kept declining, reflecting still weak demand for liquid aluminum, with structural contradictions unresolved. Overall, eased macro risk sentiment provided temporary bottom support for aluminum prices, but high inventory limited upside potential. SMM aluminum prices are expected to consolidate at high levels in the short term.

[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.]