US Fed's Interest Rate Cut Pace Unclear; SHFE Aluminum Pulled Back From Highs Last Night [SMM Aluminum Morning Brief Dec 25]

Overnight, the most-traded SHFE aluminum 2502 contract opened at 19,980 yuan/mt, hit a high of 19,990 yuan/mt, a low of 19,865 yuan/mt, and closed at 19,880 yuan/mt, down 85 yuan/mt or 0.42% from the previous trading day. On Tuesday, LME aluminum opened at $2,535/mt, reached a high of $2,575.5/mt, a low of $2,526.5/mt, and closed at $2,556/mt, up $17.5/mt or 0.68%.

Summary: On the macro front, the market remains pessimistic about the extent of the US Fed's interest rate cuts next year, with the US dollar index hovering near a two-year high, exerting pressure on base metals. Fundamentals side, the pressure on the domestic aluminum supply side has slightly eased recently, with a slight decline in domestic aluminum operating capacity. Some aluminum smelters in Sichuan and Guangxi have reported capacity technological transformations or production cuts due to losses. Demand side, market demand continues to weaken during the off-season, with subdued performance in the aluminum plate/sheet and strip and aluminum extrusion sectors, and strong expectations of inventory buildup. Overall, while the macro front remains uncertain regarding the US Fed's interest rate cut pace, and the fundamentals side sees slightly reduced supply pressure, weak demand during the off-season and growing risks of inventory buildup are weighing on the market. In the short term, aluminum prices are expected to fluctuate downward.