SMM Nov 6 Aluminum Morning Meeting Minutes:
Futures: The most-traded SHFE aluminum 2612 contract closed at 23,095 yuan/mt, up 80 yuan or 0.35% from yesterday's settlement price. It opened at 23,230.00 yuan/mt during the day and fluctuated within a range of 22,975-23,330 yuan/mt. Prices traded below the MA5 (23,093.00), MA10 (23,257.00), MA30 (23,428.00), and MA60 (23,734.00) moving averages, bottoming out and closing slightly higher. A consolidation-at-lows structure is emerging, with the moving averages above forming key resistance. The MACD DIF (-146.0887) is above the DEA (-157.1324), and the MACD histogram stands at 22.0875. Bearish momentum continues to converge. The suggested core trading range for SHFE aluminum is 22,900-23,300 yuan/mt. The LME aluminum 3M contract closed at $3,057.0/mt, down 0.33%. It opened at $3,065.0/mt during the day and fluctuated within a range of $3,046.0-3,110.0/mt. Prices traded below the MA5 (3,064.8), MA10 (3,064.9), MA30 (3,080.8), and MA60 (3,171.9) moving averages, retreating after a rapid rise. A low-level consolidation pattern is emerging, with the moving averages above forming clear resistance. The MACD DIF (-21.9134) is above the DEA (-31.9181), and the MACD histogram stands at 20.0094. Bearish momentum continues to converge. The suggested core trading range for LME aluminum is $2,950-3,100/mt.
Macro front: Richmond Fed President Barkin expects the US Fed will need to raise interest rates further, but the magnitude and pace of hikes remain uncertain. Cleveland Fed President Hammack stated that rates need to be restrictive to push inflation back to the central bank's target, and more frequent adjustments can reduce the risk of policy falling behind the curve. US President Trump said the US is very close to resolving the Russia-Ukraine conflict and will reach a deal. This will be a major agreement, and its scope will extend beyond Ukraine, potentially involving all of Europe. On the Iran issue, Trump said progress is going very well. If the remaining Iran issues must be resolved, the US is ready. Senior Iranian officials said Iran has sent a nuclear proposal to the US via Qatar, and the proposal will only be discussed after the US meets its seven demands.
Fundamentals: Supply side, China's operating aluminum capacity stayed high, and weekly aluminum production continued to edge up this week. Ex-China, production resumptions at capacity that had been cut in the Middle East progressed slightly faster than expected, and with new capacity in Indonesia gradually coming online, aluminum supply continued its recovery trend. LME aluminum inventory remained at around 229,000 mt, near a 20-year low. Demand side, aluminum prices shot up and then pulled back this week. Early in the week, supported by low inventory, SHFE aluminum briefly rose above 23,400 yuan/mt, then fell for consecutive sessions to around 22,900 yuan/mt. Downstream purchases were mainly need-based restocking, with limited willingness to chase higher prices. This Thursday, China's aluminum ingot social inventory fell by 28,000 mt WoW from last Thursday, providing some support to aluminum prices. However, the October aluminum processing industry composite PMI fell below the 50 mark to 48.9%, and signals of weakening downstream processing demand increased as the peak season drew to a close. The proportion of liquid aluminum edged down WoW this week.
Primary aluminum market: East China market: During the previous trading day, SHFE aluminum futures center moved higher, but as spot premiums continued to fall, spot transaction sentiment improved slightly. Suppliers continued to sell at lower prices, and actual spot SHFE aluminum transactions showed a slight discount against the SHFE aluminum 2611 contract. Yesterday, SMM A00 aluminum ingot transactions were at a discount of 20 yuan/mt to parity. Central China market: Premiums in the central China market were basically stable, gradually warming market trading sentiment. Futures prices edged up slightly, and with central China discounts and the Henan-Shanghai price spread reaching psychological price levels, downstream processing enterprises' buying sentiment improved notably from previous days, and quotes stabilized. Ultimately, actual transaction prices in the central China market were at a discount of 80-100 yuan/mt against the SHFE aluminum November contract. South China market: Aluminum prices rose slightly yesterday, and the spot market strengthened. Aluminum ingot inventory continued to decline significantly, the backwardation structure's price spread between futures contracts narrowed somewhat, and the actual basis stalled. Under these conditions, market confidence recovered, and suppliers became increasingly inclined to hold prices firm and hold back from selling, tightening spot availability. On the demand side, buyers rushed to buy amid continuous price rise to restock, while also increasingly entering the market to purchase based on low inventory and tight circulation. They actively accepted prices from non-premium to small premium levels, with mainstream prices steadily rising from parity to premium territory. Transactions increasingly showed a situation of tight supply with limited offers. Spot transaction prices were concentrated at a premium of 130-170 yuan/mt against the SHFE aluminum 2611 contract.
Aluminum scrap: Yesterday, SMM A00 aluminum closed at 23,380 yuan/mt, up 30 yuan/mt from the previous trading day, while the aluminum scrap market was overall stable. On price differences between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 2,092 yuan/mt on Nov 5, narrowing 104 yuan/mt from last Thursday. The price difference between A00 aluminum and shredded aluminum tense scrap was 468 yuan/mt, narrowing 229 yuan/mt, at a historical low. Supply side, tax audits in multiple regions continued to deepen, and the scarcity of compliant invoiced aluminum scrap showed no easing. Enterprises holding invoices remained strongly inclined to hold prices firm, and most aluminum scrap quotes were stable at the start of the week amid a wait-and-see stance. Demand side, off-season characteristics began to emerge. Aluminum scrap costs stayed high while finished product price increases were difficult, squeezing theoretical profits. Scrap utilization enterprises' willingness to chase higher prices weakened notably. Wrought aluminum alloy enterprises continued to push for lower prices, and downward pressure on wrought aluminum alloy scrap continued to be released. In the short term, the combination of weakening primary aluminum support, increased import arrivals, and insufficient demand as the off-season begins has notably weakened upward momentum. Prices are more likely to show resilient adjustments after edging down in tandem with primary aluminum. By category, aluminum tense scrap remained relatively firm, supported by cast aluminum alloy orders and low inventory, while wrought aluminum alloy scrap still faces potential further declines under pressure from wrought aluminum alloy enterprises. Going forward, focus on the spread of tax audits and changes in invoicing quotas across regions, the actual realization of primary aluminum replacement after price differences between A00 aluminum and aluminum scrap compress to low levels, and the pace of decline in downstream operating rates during the off-season.
Secondary aluminum alloy: Yesterday, the ADC12 market was overall stable with a wait-and-see stance. SMM ADC12 prices held steady at 24,200 yuan/mt. As aluminum prices and futures rebounded slightly, market sentiment eased somewhat from earlier, and some downward price pressure was released. However, the current rebound is limited and has not yet formed a clear upward driver. Meanwhile, end-use demand remained relatively mediocre, and the improvement in market transactions was limited, lacking substantive support for price increases. With no further clear signals from the cost side or futures trends, the industry's overall willingness to adjust prices remained weak. In the short term, ADC12 prices are expected to continue moving sideways in a narrow range. Going forward, attention should remain on aluminum price trends and changes in end-user procurement demand.
Comprehensive outlook: On the macro front, hawkish tightening expectations are competing with a short-term rebound in the weak US dollar. The US-Iran situation and the Russia-Ukraine conflict have seen progress recently but still lack final resolutions. On fundamentals, destocking provides a floor, but downstream processing demand is weakening and the peak season is nearing its end. Fundamentals are similarly mixed. In the short term, aluminum prices are expected to consolidate with adjustments.
[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions prudently and not use this as a substitute for independent judgment. Any decisions made by clients are not related to SMM.]
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