Inventory Performance Better Than Expected in Early December, Short-Term Market Sentiment Eases [SMM Aluminum Morning Meeting Summary Dec 3]

Overnight, the most-traded SHFE aluminum 2501 contract opened at 20,380 yuan/mt, reached a high of 20,460 yuan/mt, a low of 20,370 yuan/mt, and closed at 20,435 yuan/mt, up 50 yuan/mt or 0.25% from the previous day. On Monday, LME aluminum opened at $2,594.5/mt, hit a high of $2,612/mt, a low of $2,574.5/mt, and closed at $2,600.5/mt, up $1.5/mt or 0.06%.

Summary: On the macro front, there is a possibility of a ceasefire in the Middle East and the Russia-Ukraine situation. Several US Fed officials are open to an interest rate cut in December, leading to a slight rebound in non-ferrous metals. Domestically, positive signals were released, with the November manufacturing PMI above the 50 mark. On the fundamentals side, high costs of aluminum have raised concerns about production cuts among high-cost enterprises. However, buying sentiment in the downstream market has weakened due to the off-season, leading to a weak spot market. In terms of inventory, although the shipping pace of goods from Xinjiang has recently eased, causing domestic aluminum ingot inventory to fluctuate, it is expected that the backlog in Xinjiang will continue to ease, and caution is needed against the pressure and risks from concentrated arrivals. Meanwhile, although the year-end inventory buildup inflection point has been delayed, the sustainability of unusual increase in aluminum ingot outflows from warehouses in the off-season is limited. Low inventory continues to provide short-term support for aluminum prices, but excessive optimism is not advisable. In the short term, the cancellation of export tax rebates for aluminum semis in December is expected to negatively impact medium and long-term aluminum demand, but short-term market sentiment has eased, and aluminum prices are expected to remain in a state of fluctuation and consolidation in the near term.