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12.17 SMM Aluminum Morning Meeting Summary
Futures Market: Overnight, the most-traded SHFE aluminum 2502 contract opened at 20,170 yuan/mt, hitting a high of 20,205 yuan/mt and a low of 20,115 yuan/mt, before closing at 20,140 yuan/mt, down 75 yuan/mt or 0.37% from the previous day. On Monday, LME aluminum opened at $2,614/mt, reached a high of $2,615.5/mt and a low of $2,559.5/mt, and closed at $2,564.5/mt, down $50.5/mt or 1.93%.
Macro Front: (1) The central bank stated it will implement a moderately loose monetary policy, with timely RRR cuts and interest rate cuts. It will continue to support the resolution of financing platform debt risks and stabilize the real estate market. (Bullish ★) (2) A spokesperson from the Ministry of Commerce responded to the US raising Section 301 tariffs on certain Chinese products, stating that the US should immediately correct its wrong practices and cancel the additional tariffs on Chinese goods. China will take necessary measures to firmly safeguard its rights. (Neutral) (3) Ten EU countries proposed further trade sanctions on Russia, including its aluminum and other metal production, to further reduce the country's revenue and funding for the Russia-Ukraine conflict. (Bullish ★)
Fundamentals Side: (1) According to SMM statistics, as of December 16, domestic aluminum ingot inventory in major consumption areas stood at 551,000 mt, down 6,000 mt WoW; aluminum billet inventory in major consumption areas was 91,500 mt, down 1,300 mt WoW. (Bullish ★★) (2) SMM data showed that aluminum ingot outflows from warehouses last week totaled 130,900 mt, up 5,800 mt WoW; aluminum billet outflows from warehouses were 47,600 mt, up 800 mt WoW. (Bullish ★)
Primary Aluminum Market: On Monday morning, SHFE aluminum prices slightly shifted downward. Suppliers actively sold, but actual transactions in the Wuxi market did not improve, with downstream consumption remaining weak and inventory buildup persisting. In the second trading session, as futures prices dropped significantly, downstream buying sentiment remained weak, and market transactions were mainly at discounts. Yesterday, the SMM A00 aluminum price was at a discount of 30 yuan/mt against the SHFE aluminum 2412 contract, down 30 yuan/mt from the previous trading day. The SMM A00 price recorded 20,160 yuan/mt, down 160 yuan/mt from the previous trading day. From the outflow data of major consumption areas, the continuous decline in futures prices slightly improved outflows compared to last Thursday. However, SMM statistics indicate that in-transit cargoes are still increasing, coupled with the off-season and negative effects of export orders. After the contract rollover, the east China market is unlikely to return to a premium structure.
Secondary Aluminum Raw Materials: Yesterday, domestic primary aluminum prices fluctuated downward, while aluminum scrap prices remained firm. Currently, aluminum scrap supply is tight, and suppliers are reluctant to sell at low prices amid continuous price declines, showing some hesitation to sell. Yesterday, domestic aluminum scrap prices fell by 0-100 yuan/mt. Baled UBC aluminum scrap was quoted lower by 50 yuan/mt, at 15,200-15,800 yuan/mt (excluding tax), while shredded aluminum tense scrap was quoted at 16,400-17,400 yuan/mt (liquid aluminum, excluding tax). Re-melting ingot prices fell by 50-100 yuan/mt along with aluminum prices. Recently, imported re-melting ingots have faced an inverted price structure, and future port arrivals of re-melting ingots are expected to decline. In the short term, as north China enters winter, some yards have reduced purchases, further tightening aluminum scrap supply. Under undersupply conditions, short-term prices are expected to remain firm, and the price difference between primary metal and scrap has narrowed.
Secondary Aluminum Alloy: Yesterday, aluminum prices extended their decline, while secondary aluminum prices remained firm. Large domestic secondary aluminum enterprises maintained quotes at 20,400-20,800 yuan/mt, while small and medium-sized plants also kept quotes stable at 20,000-20,300 yuan/mt. On the import side, overseas ADC12 prices remained at $2,420-2,460/mt, while port spot cargoes were quoted at 19,600-19,800 yuan/mt. The immediate loss per ton for imported ADC12 narrowed further to around 500 yuan. With seasonal reductions in dismantling volumes and obstacles to imported aluminum scrap, the circulation of aluminum scrap both domestically and overseas remains tight. Secondary aluminum plants face difficulties in raw material procurement, and in the short term, the cost of secondary aluminum alloy provides some support for prices. Before raw material pressures ease, secondary aluminum alloy prices are expected to remain more likely to rise than fall.
Summary: On the macro front, according to the CME FedWatch tool, the market sees a nearly 97% probability that the US Fed will cut interest rates by a quarter percentage point at the conclusion of its policy meeting on Wednesday. The yield on the benchmark US 10-year Treasury note fell by 0.8 basis points to 4.391%. Key data to be released this week include US GDP and inflation figures, which may further influence market sentiment. Domestically, positive signals continue to emerge. On December 16, the central bank announced timely RRR cuts and interest rate cuts to stabilize the real estate market. The Central Financial Office also responded with specific measures to boost consumption. On the fundamentals side, high aluminum production costs have led to some capacity reductions. On the demand side, domestic downstream aluminum demand has entered the off-season, and aluminum semis exports in December may see a significant decline due to pre-export rushes. Weak demand both domestically and overseas has dragged down the operating rates of downstream processing enterprises. According to SMM statistics, on Monday, domestic aluminum ingot inventory in major consumption areas decreased by 6,000 mt WoW to 551,000 mt. The easing of shipment pace in Xinjiang has led to fluctuating inventory levels, but the backlog in Xinjiang is expected to continue to ease. However, concentrated arrivals should be guarded against, and the turning point for aluminum ingot inventory is expected in late December. Low inventory provides weaker support for aluminum prices. In the short term, aluminum prices are expected to fluctuate amid mixed factors. Attention should be paid to macroeconomic changes and the trend of aluminum production costs.
[The information provided is for reference only. This article does not constitute direct investment advice. Clients should make cautious decisions and not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM.]
