Supply-Demand Marginal Changes Limited, Aluminum Prices Consolidate at High Levels Supported by Macro Factors [SMM Aluminum Morning Meeting Minutes]

SMM Morning Meeting Minutes for Jan 27

Futures:During the night session on Jan 26, the most-traded SHFE aluminum 2603 contract opened at 24,400 yuan/mt, reached a high of 24,430 yuan/mt, touched a low of 24,225 yuan/mt, and finally closed at 24,380 yuan/mt, up 165 yuan/mt or 0.68% from the previous close. Technically, the MA moving averages showed a divergent arrangement (MA5: 24,254.00 > MA10: 24,130.50 < MA20: 24,230.00 > MA40: 23,914.00), and the MACD 4-hour candlestick continued to show a green bar (DIFF: 142.81, DEA: 174.33). In terms of open interest, the night session open interest was about 322,000 lots, an increase of 148 lots from the daytime session. LME aluminum opened at $3,169/mt, hit a high of $3,204/mt, touched a low of $3,159.5/mt, and finally closed at $3,195.5/mt, up 0.69% from the previous day. Trading volume was 25,000 lots, down 3,502 lots, and open interest was 699,000 lots, up 5,687 lots.

Macro Front:This Thursday, Jan 29, Beijing time, the US Fed is expected to announce its first monetary policy interest rate decision of the year. Goldman Sachs expects the impact of this decision on the market to likely be "uneventful," with the Fed only making minor adjustments to its monetary policy stance. However, if news emerges from the White House regarding Powell's successor, it could have a greater impact on the market. (Neutral) In 2026, the Ministry of Commerce will deeply implement special actions to boost consumption, focusing on three aspects: introducing policies, organizing events, and optimizing scenarios. (Bullish★)

Fundamentals:According to an SMM survey, China's ESS battery cabin shipments in 2025 were about 400 GWh, accounting for over 80% of the global share. Based on SMM's calculated ESS single consumption of 1,780 mt/GWh and global ESS battery cabin shipments, the corresponding aluminum semis demand for global ESS in 2025 was 850,000 mt, of which domestic consumption accounted for about 710,000 mt of aluminum semis. It is estimated that domestic demand for aluminum semis for ESS in 2026 will still see an increase of 280,000 mt.

Primary Aluminum Market:In the early session, SHFE aluminum 2602 first rose then fell, with the price center slightly lower than the previous trading day. On Tuesday, overall market trading sentiment weakened, with downstream smelters showing low purchasing enthusiasm. The mainstream transaction prices were mainly at a discount of 20 yuan/mt to the average price. The east China market selling sentiment index on Tuesday was 2.9, down 0.06 WoW; the buying sentiment index was 2.37, down 0.1 WoW. SMM A00 aluminum was quoted at 24,030 yuan/mt, down from the previous trading day. On Tuesday, downstream processing enterprises in the central China market faced about 50% production restrictions due to repeated environmental protection-related controls, leading to a significant drop in traders' buying sentiment. However, suppliers showed a significant willingness to sell at highs, resulting in substantial market shipments. Actual transaction prices declined throughout, dropping from parity with the central China price before the opening to a discount of 30 yuan to the central China price, with a few traders actually transacting at a discount of 50 yuan to the central China price. On Tuesday, the selling sentiment index in the central China market was 2.83, up 0.02 WoW; the purchasing sentiment index was 2.28, down 0.05 WoW. SMM A00 aluminum in central China closed at 23,940 yuan/mt, down 90 yuan/mt from the previous trading day, at a discount of 250 yuan/mt against the 2602 contract, down 20 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -90 yuan/mt, widening by 10 yuan/mt from the previous trading day.

Aluminum Scrap:On Tuesday, spot primary aluminum prices edged down from the previous trading day, with SMM A00 aluminum closing at 24,030 yuan/mt. Aluminum scrap market prices showed significant divergence on Tuesday, with varied adjustments. Baled UBC was mainly offered at 17,450-17,850 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was mainly offered at 19,400-20,000 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 3,538 yuan/mt on January 26, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,731 yuan/mt. On Tuesday, regions such as Henan, Foshan, Jiangxi, and Anhui caught up with last week's aluminum price gains, while other regions adjusted quotes lower following the aluminum price decline. Against the backdrop of high aluminum prices forcing scrap aluminum to follow suit, a situation of "nominal prices with no actual transactions" has emerged, dampening downstream buying sentiment and leading to purchasing as needed. The aluminum scrap market is expected to hover at highs this week, with shredded aluminum tense scrap (priced based on aluminum content) mainly ranging between 19,200-19,800 yuan/mt (ex-tax). Downside pressures persist as the Chinese New Year approaches, with enterprises gradually entering holiday schedules. Scrap yards closing early reduce market liquidity, downstream operating rates remain sluggish, and resistance to high prices is strong. Close attention should be paid to primary aluminum trends, weather changes, and pre-holiday production halts and holiday schedules to guard against the risk of a pullback from highs.

Secondary Aluminum Alloy:Futures side, the aluminum alloy 2603 contract opened at 23,175 yuan/mt on Tuesday, surged to 23,320 yuan/mt in the morning session then quickly pulled back, touching a low of 22,905 yuan/mt. As of 14:00, the contract closed at 22,990 yuan/mt, down 135 yuan/mt or 0.63% from the previous trading day, with the movement primarily driven by bulls reducing positions. In the spot market, the A00 aluminum price fell 80 yuan/mt to 24,030 yuan/mt on Tuesday, while the SMM ADC12 price held steady at 24,000 yuan/mt. Amid the declining price trend, sentiment for price adjustments in the secondary aluminum market was low, with most producers maintaining stable prices. Demand side, inhibited by high prices and weak pre-holiday stockpiling motivation, downstream procurement focused on rigid demand, resulting in an overall sluggish trading atmosphere. Supply side faced multiple disruptions: expectations for adjustments to regional tax burden policies, enhanced compliance checks on reverse invoicing in some areas, logistics impacts from snowfall, and repeated environmental protection-driven production restrictions in regions like central China, leading some enterprises to cut production or halt operations early for the holiday. The industry operating rate is expected to show a downward trend in the short term. Looking ahead, although high aluminum prices and seasonal off-season demand are suppressing market activity, cost-side aluminum scrap prices are providing support, coupled with supply tightens driven by policy and environmental protection factors. Secondary aluminum alloy prices are expected to continue fluctuating at highs in the short term. Subsequent focus should be on raw material flow, changes in downstream operating rates, and the evolution of pre-holiday stockpiling sentiment.

Aluminum Market Summary:On the macro front, David Mericle, Chief US Economist at Goldman Sachs, stated in his investor report that the US Fed is expected to hold rates steady this week, with two potential interest rate cuts later this year, the first likely in June. With stable rate cut expectations, market risk appetite remains steady. Domestically, 2026 macro policies clearly focus on strengthening the domestic circulation as the driving force, aiming to continuously release endogenous growth momentum by comprehensively expanding domestic demand. Supply side, domestic and Indonesian aluminum projects continue ramping up production, with daily average production steadily increasing, sustaining the supply growth trend. Demand side shows signs of stabilization; after aluminum price fluctuations narrowed, downstream processing enterprises' operating rates rebounded slightly, supported by orders on hand, warehouse withdrawals increased YoY. Last week, the comprehensive operating rate for aluminum processing recorded 60.9%, up 0.7 percentage points WoW. Inventory side, social inventory on Monday this week increased by 28,000 mt compared to last Monday and by 34,000 mt compared to last Thursday, continuing the overall inventory buildup trend. The proportion of liquid aluminum continues to decline, reflecting still weak demand for liquid aluminum, with structural contradictions yet to be resolved. Overall, eased macro risk sentiment provides phased bottom support for aluminum prices, but high inventory limits upside potential. SMM aluminum prices are expected to consolidate at highs in the short term.

[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 to replace independent judgment. Any decisions made by clients are unrelated to SMM.]