This Week, the Macro Front Was Bearish. On One Hand, the US Fed's meeting minutes indicated a possible 25 basis points interest rate cut in December, aligning with market expectations. US President Donald Trump announced a 25% tariff on all products entering the US from Mexico and Canada, along with an additional 10% tariff on Chinese goods, reigniting trade war concerns and impacting market confidence. Additionally, the ceasefire agreement between Lebanon and Israel officially took effect during the week, and Ukrainian President Volodymyr Zelensky stated that the conflict could end by 2025. The easing of hot war tensions also weighed on commodity prices.
Fundamentals: This week, domestic aluminum enterprises remained largely stable. In Xinjiang, new capacity was gradually put into operation, while capacity replacement projects in Guizhou progressed steadily. However, new projects faced delays due to high alumina costs and supply difficulties. Furthermore, an SMM survey revealed that an aluminum smelter in Sichuan conducted partial technological transformation on its electrolytic cells on Monday, which is expected to take 15 days and affect approximately 3,000 mt of production. Another smelter in Chongqing carried out technological upgrades on its outdated small electrolytic cells to meet the latest national standards for single-cell energy consumption, with the upgrades expected to take 30-40 days. In other regions, some aluminum smelters have plans for maintenance or technological transformation in December, but none have started yet. SMM will continue to track their progress. Cost side: Domestic spot alumina prices mainly rose during the week, keeping domestic aluminum production costs more likely to rise than fall. As of Thursday, the immediate full average cost of domestic aluminum production was approximately 21,192 yuan/mt, up 94 yuan/mt WoW. During the week, the domestic spot aluminum market saw weak consolidation, and the industry remained in a loss-making state. As of Thursday, the average loss for domestic aluminum enterprises was about 793 yuan/mt, with industry profits down 396 yuan/mt WoW. Demand side: This week, the operating rates of domestic downstream aluminum sectors remained stable MoM. Due to the cancellation of aluminum semis export tax rebates, some enterprises rushed to meet deadlines last week and focused on shipments this week, leading to a decline in operating rates for some enterprises. However, the aluminum extrusion and aluminum wire and cable sectors provided some support, keeping overall operating rates stable. The impact of domestic aluminum semis export policies on enterprise operations requires further observation.
Technical Analysis: The model predicts that the SMMA00 aluminum average price will fluctuate within the range of [20,010, 20,990] yuan/mt from this Friday to next Thursday (2024-12-05), with a price center of 20,480 yuan/mt. The extreme price range is [19,620, 21,380], the normal price range is [19,880, 21,120], and the conservative price range is [20,140, 20,860]. Next week's price trend is expected to fluctuate rangebound or fluctuate downward. The support range is [19,880, 20,140], and the resistance range is [20,860, 21,120]. The model also predicts that the closing price of the aluminum most-traded contract will fluctuate within the range of [19,765, 20,985] yuan/mt from this Friday to next Thursday (2024-12-05), with a price center of 20,360 yuan/mt. The extreme price range is [19,370, 21,390], the normal price range is [19,630, 21,120], and the conservative price range is [19,900, 20,850]. Next week's price trend is expected to fluctuate rangebound or fluctuate downward. The support range is [19,630, 19,900], and the resistance range is [20,850, 21,120].
In Summary, on the macro front, Trump's expected tariffs on Canada, Mexico, and China could trigger a global tariff and trade war. Combined with lingering uncertainties in geopolitical conflicts, risk-averse sentiment persists, weighing on non-ferrous metals. Domestically, the direction of promoting consumption and supporting real estate remains unchanged, creating a bullish macro atmosphere. On the fundamentals, aluminum smelters' costs remain high, providing strong support for aluminum prices. This week, some delayed shipments from Xinjiang arrived, leading to an inventory buildup in major consumption areas. Coupled with fading rush-to-meet-deadlines sentiment downstream, demand weakened, spot transactions softened, and premiums narrowed, reducing support for aluminum prices. SMM expects the most-traded SHFE aluminum contract to fluctuate between 20,000-20,850 yuan/mt next week, while LME 3M aluminum is likely to range between $2,550-2,680/mt. Continued attention should be paid to domestic consumption trends and changes in international macro sentiment.
Data Source: SMM
