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12.27 SMM Aluminum Morning Meeting Summary
Futures Market: Overnight, the most-traded SHFE aluminum 2502 contract opened at 19,800 yuan/mt, hit a high of 19,850 yuan/mt, a low of 19,725 yuan/mt, and closed at 19,730 yuan/mt, down 30 yuan/mt or 0.15% from the previous trading day. LME aluminum was closed for two days due to the holiday.
Macro Front: (1) The results of the fifth national economic census were released, revising 2023 GDP to 129.4 trillion yuan, an increase of 3.4 trillion yuan from the preliminary figure (bullish★); (2) Netanyahu stated that Israel's strikes on the Houthi forces have just begun (bullish★).
Fundamentals Side: (1) According to SMM statistics, as of December 26, China's aluminum ingot social inventory stood at 490,000 mt, down 38,000 mt WoW (bullish★); (2) According to SMM statistics, as of December 26, China's aluminum billet social inventory was 103,000 mt, up 13,900 mt WoW (bearish★); (3) According to SMM statistics, in 2024, there are 41 new and under-construction secondary aluminum projects in China, with a total capacity of 4.63 million mt, including 2.05 million mt of new secondary cast aluminum alloy capacity and 2.58 million mt of new secondary wrought aluminum alloy capacity (bearish★).
Primary Aluminum Market: On Thursday morning, the most-traded SHFE aluminum contract fluctuated rangebound after opening. Aluminum prices remained at low absolute levels, coupled with low inventory, and downstream buying sentiment remained strong. Specifically, in east China, suppliers' inventories declined, and downstream buying sentiment improved, narrowing the discount against futures to around 10 yuan/mt against the SMM average price. SMM A00 aluminum ingot was at a discount of 30 yuan/mt against the SHFE aluminum 2501 contract, up 10 yuan/mt from the previous trading day. SMM A00 aluminum ingot was recorded at 19,820 yuan/mt, down 10 yuan/mt from the previous trading day. Additionally, as year-end approaches, market transactions may decrease, and SMM will continue to monitor subsequent trading conditions and the signing of new long-term contracts. In central China, spot aluminum prices remained at low absolute levels recently, with suppliers' inventories declining and tight market supply. The Henan-Shanghai price spread remained stable at a discount of around 70 yuan/mt. Market transactions showed initial signs of weak downstream demand, but low inventory provided price support. SMM central China A00 aluminum ingot was recorded at 19,750 yuan/mt, down 10 yuan/mt from the previous trading day, with actual market transactions largely on par with SMM central China prices.
Secondary Aluminum Raw Materials: On Thursday, aluminum prices fluctuated rangebound, with SMM A00 aluminum prices down 10 yuan/mt from the previous day to 19,820 yuan/mt. Secondary aluminum prices remained largely stable. Domestically, large secondary aluminum enterprises maintained stable quotes at 20,500-20,800 yuan/mt, while medium and small enterprises quoted at 20,200-20,400 yuan/mt. For imports, overseas ADC12 prices ranged from $2,430-2,460/mt. Due to stable domestic and overseas prices and recent exchange rates, the immediate loss per ton for imported ADC12 remained below 400 yuan. With no significant fluctuations in aluminum prices, secondary aluminum market quotes continued to remain stable. Currently, secondary aluminum plants face high costs, and some enterprises have reduced operating rates due to raw material shortages or environmental protection-related controls. Finished product inventories at secondary aluminum plants and traders' inventories have both declined. In the short term, secondary aluminum alloy prices are expected to be more likely to rise than fall.
Secondary Aluminum Alloy: On Thursday, primary aluminum spot prices fell slightly compared to the previous day, with SMM A00 spot aluminum closing at 19,820 yuan/mt, down 10 yuan/mt from the previous trading day. Aluminum scrap market quotes remained largely stable, with baled UBC prices unchanged from the previous day. Currently, large domestic enterprises are executing long-term contracts as usual, while small enterprises remain cautious. In regions such as Anhui and Henan, reverse invoicing agreements are being signed successively, and pessimistic sentiment among traders in these areas regarding future prices has resurfaced. On Thursday, baled UBC aluminum scrap was quoted at 14,750-15,725 yuan/mt (excluding tax), while shredded aluminum tense scrap was quoted at 16,000-17,300 yuan/mt (liquid aluminum, excluding tax). In the short term, the overall supply of aluminum scrap in the spot market remains limited. Downstream buyers, having restocked at low prices earlier, show low purchase willingness for high-priced aluminum scrap. Overall market transactions are sluggish, and the price difference between primary metal and scrap is expected to narrow.
Summary: On the macro front, market expectations for the extent of US Fed interest rate cuts next year remain pessimistic, with the US dollar index hovering near its two-year high, putting pressure on base metals. On the fundamentals side, domestic aluminum supply pressure has eased recently, with a slight decline in operating capacity. Some aluminum smelters in Sichuan and Guangxi have reported capacity reductions due to technological transformation or losses. On the demand side, market demand continues to weaken during the off-season, with industries such as aluminum plate/sheet and strip and aluminum extrusion showing sluggish performance, and inventory buildup expectations remain strong. Overall, on the macro front, the pace of US Fed interest rate cuts remains unclear. On the fundamentals side, although supply pressure has slightly eased, weak demand during the off-season and the risk of inventory buildup continue to grow. In the short term, aluminum prices are expected to fluctuate downward.
[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.]
