》Click to View the SMM Aluminum Industry Chain Database
》Subscribe to Access SMM Historical Spot Metal Prices
12.18 SMM Aluminum Morning Meeting Summary
Futures Market: Overnight, the most-traded SHFE aluminum 2502 contract opened at the highest point of 19,945 yuan/mt, hit a low of 19,875 yuan/mt, and closed at 19,935 yuan/mt, up 10 yuan/mt or 0.05% from the previous day. On Tuesday, LME aluminum opened at the highest point of $2,566/mt, hit a low of $2,526/mt, and closed at $2,537/mt, down $27.5/mt or 1.07%.
Macro Front: (1) US November retail sales month-on-month rose by 0.7%, the highest since September, exceeding the market expectation of 0.5%. Analysts believe that strong retail sales data, combined with the recent rebound in inflation data, suggest that the US Fed may pause interest rate cuts in January next year. (Bearish★) (2) The Ministry of Industry and Information Technology (MIIT) and three other departments issued the "Action Plan for Standard Improvement to Guide the Optimization and Upgrading of the Raw Materials Industry (2025-2027)." The plan aims to establish a more advanced, efficient, green, and secure standard system for the raw materials industry by 2027, with improved mechanisms and enhanced technical levels for traditional industry transformation and new material innovation. It includes completing the evaluation and optimization of standards for industries such as petrochemicals, chemicals, steel, non-ferrous metals, building materials, rare earths, and gold, and constructing a standard system to support high-quality development in the raw materials industry. (Neutral)
Fundamentals Side: (1) SMM learned that environmental protection inspections have resumed in Zhengzhou, a major hub for aluminum plate/sheet and strip production. The inspections are stringent, and many local aluminum plate/sheet and strip enterprises have reported production cuts as required, with no confirmed timeline for resumption. (Bearish★) (2) On December 17, LME aluminum inventory dropped by another 2,500 mt from the previous day to 670,000 mt, the lowest level in over seven months. (Bullish★)
Primary Aluminum Market: Yesterday morning, SHFE aluminum futures prices shifted downward in a stepwise manner, breaking below the 20,000 yuan/mt mark. Downstream consumption in east China remained sluggish, prompting suppliers to lower premiums to sell. Spot market discounts widened as SHFE aluminum fell below 20,000 yuan/mt, though discounts narrowed slightly later. However, downstream buyers remained cautious, and market transactions were weak. Yesterday, SMM A00 aluminum recorded a discount of 90 yuan/mt against the SHFE aluminum 2501 contract, down 60 yuan/mt from the previous trading day. Considering the price spread between futures contracts, the actual decline was around 20 yuan/mt. SMM A00 aluminum was quoted at 19,900 yuan/mt, down 260 yuan/mt from the previous trading day. In central China, aluminum prices also fell below the 20,000 yuan/mt mark. Amid tight market supply, suppliers held back cargoes, narrowing the price spread between Henan and Shanghai to a discount of around 130 yuan/mt. Inventory-wise, SMM daily inventory statistics showed slight increases in mainstream consumption areas due to higher arrivals. Attention should be paid to downstream consumption after aluminum prices fell below 20,000 yuan/mt. Outflows from warehouses in major consumption areas may improve slightly, but the off-season and negative impact of export orders suggest the market remains seller-dominated. SMM A00 spot discounts are expected to narrow slightly this week.
Secondary Aluminum Raw Materials: Yesterday, domestic primary aluminum prices fell below the 20,000 yuan/mt mark, dragging aluminum scrap prices lower. Currently, aluminum scrap supply remains tight, and suppliers are reluctant to sell at low prices amid continuous price declines, showing some hesitation to sell. On Tuesday, baled UBC aluminum scrap prices were lowered by 0-200 yuan/mt to 15,100-15,420 yuan/mt (excluding tax), while shredded aluminum tense scrap prices were reduced by 100-200 yuan/mt to 16,000-17,300 yuan/mt (liquid aluminum, excluding tax). In the short term, as north China enters winter, some yards have reduced purchases. Additionally, limited imports due to port clearance issues and inverted price spreads between domestic and overseas markets have further constrained aluminum scrap supply. Tight supply and demand imbalance mean aluminum scrap prices are unlikely to follow the downward trend significantly, leading to a narrower price difference between primary metal and scrap.
Secondary Aluminum Alloy: Yesterday, secondary aluminum alloy prices remained relatively firm. Domestically, large secondary aluminum enterprises lowered quotes by 0-100 yuan/mt to 20,300-20,700 yuan/mt, while small and medium-sized plants reduced quotes by 0-100 yuan/mt to 20,000-20,200 yuan/mt. Despite the drop below the 20,000 yuan/mt mark, secondary aluminum alloy market prices fell by no more than 100 yuan/mt, with many enterprises continuing to stand firm on quotes. This is mainly due to the tight circulation of aluminum scrap. To meet delivery and stocking demand, secondary aluminum plants actively purchased scrap, though procurement remained challenging. With limited cost-side declines, secondary aluminum alloy prices are expected to remain firm, fluctuating rangebound in the short term alongside aluminum prices.
Summary: On the macro front, the US dollar index hovered at highs, closing up 0.088%. Overnight, metals broadly declined. US PMI data showed a divergence between manufacturing and services, with no significant change in interest rate cut expectations. Investors are awaiting the US Fed's interest rate decision. On the fundamentals side, high aluminum production costs have led to some capacity cuts. On the demand side, domestic downstream aluminum demand has entered the off-season. Additionally, the cancellation of export tax rebates has significantly reduced export orders. The resumption of environmental protection inspections in Zhengzhou has further weakened downstream operating rates, as many local aluminum plate/sheet and strip enterprises reported production cuts with no confirmed resumption timeline. Overall, the off-season and inventory buildup risks have led to pessimistic market sentiment. In the short term, aluminum prices are expected to remain weak and consolidate. Attention should be paid to the US Fed's final policy meeting of 2024 and its interest rate decision later today.
[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make cautious decisions and not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM.]
