Bears concentrated on exiting positions, with the most-traded SHFE aluminum contract entering a consolidation phase at high levels [SMM Aluminum Morning Meeting Summary]

February 3 SMM Morning Meeting Minutes

Futures: During the night session on February 2, the most-traded SHFE aluminum 2603 contract opened at 23,435 yuan/mt, reached a high of 23,575 yuan/mt, touched a low of 23,145 yuan/mt, and finally closed at 23,530 yuan/mt, up 495 yuan/mt or 2.15% from the previous close. From a technical perspective, the upward trend of the 20-day and 60-day moving averages was broken, with prices falling rapidly below them, damaging the medium-term uptrend pattern, and turning medium-term support into resistance. In terms of open interest, the night session open interest was approximately 239,000 lots, an increase of 1,140 lots from the daytime session. LME aluminum opened at $3,127.5/mt, reached a high of $3,127.5/mt, touched a low of $2,979.5/mt, and finally closed at $3,056.5/mt, down 2.52% from the previous day. Trading volume was 53,000 lots, a decrease of 47.16 million lots, while open interest was 703,000 lots, an increase of 1,997 lots.

Macro Front: The ISM report indicated that the US manufacturing sector expanded in January at its fastest pace since 2022. The President of the San Francisco Fed projected no interest rate cuts this year, citing that strong economic growth requires interest rates to remain at moderately restrictive levels. (Bearish ★) Shanghai has substantially initiated work on purchasing second-hand homes for affordable rental housing projects. Pudong New Area, Jing'an District, and Xuhui District serve as the first batch of pilot areas. (Neutral)

Fundamentals: According to SMM data, the average tax-inclusive full cost for China's aluminum industry in January 2025 fell 0.6% MoM and dropped 19.5% YoY. During the period, costs for raw material alumina and auxiliary material prebaked anode decreased, but power costs and aluminum fluoride costs increased, leading to a slight pullback in the total cost. The SMM A00 aluminum average spot price in January was approximately 23,641 yuan/mt (December 26, 2025 - January 25, 2026). The monthly average aluminum price rose 1,840 yuan/mt MoM, expanding the aluminum profit margin to 7,500 yuan/mt. If calculated using the monthly average price, 100% of the domestic operating aluminum capacity was profitable in January.

Primary Aluminum Market: In the early session, the SHFE aluminum 2602 contract fluctuated downward, with its price center lower than the previous trading day. The decline in aluminum prices led to a slight increase in purchasing sentiment. However, constrained by the approaching Chinese New Year holiday, overall downstream purchasing sentiment remained at a low level. The mainstream market transactions were concentrated at a discount of 20 yuan/mt to parity. This Monday, the selling sentiment index in the east China market was 2.63, up 0.10 WoW; the buying sentiment index was 2.18, up 0.05 WoW. SMM A00 aluminum was quoted at 23,700 yuan/mt, down 960 yuan/mt from the previous trading day, at a discount of 220 yuan/mt against the 2602 contract, which narrowed by 10 yuan/mt from the previous trading day. Aluminum prices continued to decline, and with the end of environmental protection-related controls in central China, downstream processing enterprises took the opportunity to restock slightly. However, amid high aluminum prices and bearish expectations, overall buying sentiment remained weak. Suppliers showed strong wait-and-see sentiment and were clearly reluctant to sell, holding prices firm. Market supply circulation was cautious. Ultimately, actual transaction prices in the central China market ranged from a discount of 10 yuan/mt to a premium of 10 yuan/mt against the central China price. On Monday, the selling sentiment index in the central China market was 2.75, down 0.15 WoW, while the purchasing sentiment index was 2.25, up 0.2 WoW. The SMM central China price closed at 23,530 yuan/mt, down 950 yuan/mt from the previous trading day, at a discount of 390 yuan/mt against the Feb 2026 contract, flat from the previous trading day. The Henan-Shanghai price spread was -170 yuan/mt, narrowing by 10 yuan/mt from the previous trading day.

Secondary Aluminum Raw Materials:On Monday, spot primary aluminum prices plummeted compared to the previous trading day, with the SMM A00 spot price closing at 23,700 yuan/mt. Aluminum scrap prices followed the decline significantly overall on Monday. On Monday, baled UBC was quoted in a range of 17,150-17,550 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was quoted in a range of 19,200-19,900 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 3,608 yuan/mt on Feb 2, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,694 yuan/mt. After SHFE aluminum continued to fall during Friday night and experienced a sharp downward correction during Monday daytime, the most-traded contract closed down 9.01% on the day. Shanghai, Jiangsu, Shandong, Jiangxi, and other regions adjusted closely following aluminum prices, with correction ranges varying from 400-600 yuan/mt. Recently, directly affected by recycling policies and against the backdrop of aluminum scrap being forced to follow rising aluminum prices, the market has already shown a situation of "nominal prices without actual transactions." Scrap utilization enterprises in related provinces were forced to reduce or halt production, downstream purchasing sentiment was dampened, and procurement was conducted as needed. Aluminum scrap prices are expected to hover at highs this week, with shredded aluminum tense scrap (priced based on aluminum content) mainly ranging between 19,100-20,000 yuan/mt (ex-tax). Against the backdrop of persistently high primary aluminum prices, coupled with recycling policies constraining aluminum scrap market liquidity, aluminum scrap prices will receive more bottom support. However, with repeated production restrictions in central China and persistently sluggish downstream operations, the "nominal prices without actual transactions" supply-demand pattern is difficult to change, stocking demand is hard to release, and the overall tug-of-war between sellers and buyers intensifies. Before the Chinese New Year, it is necessary to closely track primary aluminum trends, the progress of lifting environmental protection warnings in central China, and pre-holiday production halts and holidays, while remaining vigilant against aluminum prices retreating after a rapid rise, which could drive aluminum scrap corrections. Market trading atmosphere will remain sluggish.

Secondary Aluminum Alloy:In the futures market, the aluminum alloy Mar 2026 contract opened at 22,700 yuan/mt on Monday, then fluctuated downward, with losses continuing to widen during the session. In the afternoon, prices further fell to 21,840 yuan/mt, hitting the 7% limit down, basically erasing all gains since January. Driven by falling precious-metal prices and weakening macro rate-cut expectations, risk appetite pulled back sharply, pressuring the entire non-ferrous complex lower. Spot side, A00 aluminum plunged 960 yuan/mt from the previous session to 23,700 yuan/mt, while SMM ADC12 was cut 500 yuan/mt to 23,850 yuan/mt. Futures’ sustained weakness forced producers to accelerate mark-downs, widening intraday losses. Inquiry activity improved, but actual deals remained sluggish amid the rapid slide; downstream buyers stayed on the sidelines. With Chinese New Year approaching, some die-casters have already shut, squeezing demand, while cheaper raw materials have eroded fundamental support; secondary aluminum-alloy prices are expected to remain in the doldrums in the near term. Import side, overseas ADC12 offers on Monday fell USD 50/mt WoW to USD 2,840–2,900/mt; domestic spot dropped toward 23,000 yuan/mt, keeping the immediate import margin around 300 yuan/mt.

Aluminum market wrap-up: Drivers: the SHFE aluminum rout stemmed from two stacked bearish factors. First, a sharp slide in precious metals stripped them of their safe-haven appeal, dragging risk appetite across the metals complex and weighing heavily on SHFE aluminum, a core non-ferrous contract. Second, macro side, fading US rate-cut expectations deflated liquidity hopes, prompting an accelerated exit from risk assets such as commodities; coupled with earlier large gains, profit-taking intensified selling pressure and the whole non-ferrous board sold off hard. Demand side: lower aluminum prices lifted purchasing interest slightly, but pre-holiday shutdowns kept overall procurement muted; inventories continued to build and the liquid-aluminum conversion ratio kept falling, leaving the structural supply-demand imbalance unresolved. Overall, short-term volatility risk in SHFE aluminum and the broader non-ferrous space has risen markedly. Prices could be further whipsawed by Fed policy shifts, and swings may yet magnify. Monitor market moves and regulatory changes closely, trade rationally and in compliance, and prudently manage positions and risk.

[The information provided is for reference only. This article does not constitute direct investment or research advice; readers should make cautious decisions and not use it as a substitute for independent judgment. Any decision made by the reader is unrelated to Shanghai Metals Market.]

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