Macro front, the market is trading on policy risks following Trump's inauguration in January 2025 and the Federal Reserve's expected pause in interest rate cuts. The US dollar surged to a two-year high, putting global risk assets under broad pressure, with the macro front leaning bearish. Attention should be paid to the "High-Quality Development of China's Economy" series of meetings on the morning of January 3, 2025, and caution is advised regarding the risk of domestic policy stimulus exceeding expectations.
Fundamentals, a major bauxite mine in Guinea has recently been affected by political changes in the country, leading to partial restrictions on land transportation shipments. Some downstream alumina refineries have already been notified to prepare for delays in bauxite shipments. Disruptions at the mine side have resurfaced, boosting aluminum prices and lifting the price center. Observing the cost side of the aluminum industry, the immediate full average cost of aluminum is approximately 21,490 yuan/mt, up 65 yuan/mt WoW as of last Thursday. However, with spot alumina prices pulling back, aluminum costs may decline. Demand side, suppliers actively sold to meet destocking targets, while the New Year's holiday during the week saw slight restocking by downstream buyers, leading to a temporary rebound in demand and a narrowing of spot market discounts. However, as the off-season deepens, downstream sectors will gradually enter the Chinese New Year holiday rhythm, and demand will weaken again.
In summary, the macro front leans bearish, with the US dollar and US Treasury yields exerting resistance on aluminum prices. On the fundamentals, overseas alumina production resumption and new domestic capacity additions are gradually easing the tight supply of alumina, and pressure on the cost side of aluminum may gradually lessen. Next week, as some processing enterprises enter the Chinese New Year holiday rhythm, the pace of inventory destocking will slow, potentially starting a new inventory buildup cycle. Key attention should be paid to the shipment pace of Guinea's mines. Currently, domestic port inventories are relatively sufficient, with minimal short-term impact on the supply side, but sentiment in the financial market is still supported. The most-traded SHFE aluminum contract is expected to trade around 19,550-20,100 yuan/mt next week, while LME aluminum is expected to trade around $2,500-2,650/mt.
Data source: SMM
