Macro front, this week saw a mix of bullish and bearish factors. New York Fed President Williams stated that further interest rate cuts are expected in the future. However, inflation data has led the market to adopt a wait-and-see attitude regarding the pace of future US Fed rate cuts. Domestically, positive signals continued to emerge. The Ministry of Finance announced plans to increase the fiscal deficit ratio and issue larger-scale government bonds in 2025. The General Office of the CPC Central Committee and the General Office of the State Council issued opinions on accelerating the establishment of a unified and open transportation market, proposing moderately advanced construction of transportation infrastructure. Many industry participants pointed out that the likelihood of RRR cuts before year-end is high, providing a positive boost to the macro front.
Fundamentals side, domestic aluminum operating capacity remained stable, with no reports of production cuts during the week. In Guangxi, certain capacities requiring shutdowns for technological transformation have been fully halted, and these capacities are expected to resume by the end of 2025. On the cost side, there was a slight easing in aluminum production costs during the week. As of Thursday, the domestic immediate full average cost of aluminum was approximately 21,425 yuan/mt, down 61 yuan/mt WoW. Currently, the market has no further production cut plans. Demand side, overall demand continued to decline during the off-season. Environmental protection inspections in Henan led to production cuts at processing enterprises, coupled with a significant retreat in major end-use demand such as PV. Although some enterprises in South China received new orders, it is difficult to say that the domestic aluminum processing sector has reversed the off-season trend. Inventory-wise, aluminum prices falling below 20,000 yuan/mt for the first time in three months, combined with the delayed arrival of the domestic inventory buildup turning point, stimulated downstream restocking and pre-holiday buying interest. This led to an overall destocking trend in social inventories during the week, supporting the narrowing of spot discounts.
Technical side, the model predicts that the SMM A00 aluminum average price will range between [19,135, 19,930] yuan/mt from this Friday to next Thursday (2025-01-02), with a price center of 19,600 yuan/mt. The extreme price range is [18,660, 20,400], the normal price range is [18,980, 20,090], and the conservative price range is [19,290, 19,770]. Next week's price trend is expected to fluctuate upward. The support range is [18,980, 19,290], and the resistance range is [19,770, 20,090]. The model also predicts that the closing price of the aluminum most-traded contract will range between [19,160, 20,110] yuan/mt from this Friday to next Thursday (2025-01-02), with a price center of 19,670 yuan/mt. The extreme price range is [18,710, 20,550], the normal price range is [19,010, 20,260], and the conservative price range is [19,310, 19,960]. Next week's price trend is expected to jump initially and then pull back or fluctuate upward. The support range is [19,010, 19,310], and the resistance range is [19,960, 20,260].
In summary, inflation data has led the market to adopt a wait-and-see attitude regarding the pace of future US Fed rate cuts on the macro front. Domestically, the direction of positive policy signals remains unchanged, which is favorable for the non-ferrous market in the long term. Fundamentals side, supply-side disruptions have decreased, and spot alumina prices have dropped back slightly but remain at high levels. Coupled with rising electricity prices during the dry season, aluminum costs remain supported. On the demand side, affected by the off-season, regional environmental protection-driven production restrictions, and earlier export rushes that overdrew future demand, downstream operating rates may continue to decline, with some small factories planning to take early holidays. Overall, the macro front remains mixed, while fundamentals show that aluminum prices falling below 20,000 yuan/mt have stimulated downstream purchasing sentiment. However, under the off-season backdrop, demand is unlikely to see significant improvement. In the short term, aluminum prices are expected to maintain a fluctuating trend. Next week, the most-traded SHFE aluminum contract is expected to operate around 19,100-20,000 yuan/mt, while LME aluminum is expected to range between $2,500-2,580/mt.
Data source: SMM
