12.15 SMM Morning Meeting Minutes
Futures: During the night session on December 12, the most-traded SHFE aluminum 2602 contract opened at 22,085 yuan/mt, reached a high of 22,175 yuan/mt, hit a low of 21,610 yuan/mt, and finally closed at 21,775 yuan/mt, down 395 yuan/mt or 1.78% from the previous close. From a technical perspective, the MA moving averages showed a pullback after forming a bullish alignment (MA5: 22,010.00 < MA10: 22,028.00 < MA20: 22,050.00 > MA40: 21,796.13), and the MACD 4-hour candlestick level continued to show a green bar (DIFF: 68.35, DEA: 102.78). In terms of open interest, the night session open interest was approximately 305,000 lots, down 9,769 lots from the daytime session. LME aluminum opened at $2,893/mt, reached a high of $2,908.5/mt, hit a low of $2,856.5/mt, and finally closed at $2,875/mt, down 0.69%. The trading volume was 22,900 lots, up 2,435 lots, and the open interest was 707,000 lots, up 11,008 lots.
Macro Front: The National Financial System Work Conference was held in Beijing on December 12. He Lifeng, Member of the Political Bureau of the CPC Central Committee and Director of the Central Financial Commission Office, emphasized the continuation of appropriately accommodative monetary policies, strengthening financial support for key areas such as expanding domestic demand, technological innovation, and small and micro enterprises, steadily and orderly advancing financial reform and opening up, and managing expectations well. (Bullish ★) Ahead of his meeting with the US special envoy in Berlin, Ukrainian President Volodymyr Zelenskyy stated that Ukraine has abandoned its goal of joining NATO in exchange for Western security guarantees, as a compromise to end the Russia-Ukraine conflict. This move marks a significant shift in Ukraine's stance. (Bearish ★) Donald Trump revealed the top candidate for the next Fed Chairman. Trump noted that Kevin Warsh largely shares his views on monetary policy and hopes the federal funds rate will be lowered to "1% or even lower" within a year to help the Treasury reduce the high financing costs of US government debt. (Bullish ★)
Fundamentals: Inventory-wise, domestic primary aluminum ingot inventories in mainstream consumption areas recorded 596,000 mt this Monday, an increase of 12,000 mt from last Thursday and 1,000 mt from last Monday. Last week, SMM's weekly proportion of liquid aluminum in domestic primary aluminum recorded 76.58%, down 0.02 percentage points WoW, indicating consumption resilience with a limited decline in the liquid aluminum ratio. The weekly operating rate of leading domestic aluminum downstream processing enterprises fell 0.1 percentage point WoW to 61.8%, continuing the overall weak trend in the off-season. Currently, the aluminum processing demand side lacks strong growth drivers, and the overall operating rate is expected to fluctuate at low levels in the short term.
Primary Aluminum Market: Last Friday's morning session saw fluctuations in the SHFE aluminum 2601 contract, with the absolute price moving higher again compared to the previous trading day's morning comment. Due to transportation disruptions in Xinjiang, social aluminum ingot inventories continued their destocking trend. Although aluminum ingot inventories in east China showed a slight buildup, the supply of spot cargo available for circulation in the market remained limited. Some suppliers were optimistic about future aluminum prices, leading to increased reluctance to sell. Downstream buyers maintained just-in-time procurement, with actual transaction prices mostly ranging from parity to a premium of 10 yuan/mt against the SMM average price. Spot discounts further narrowed. Last Friday, the selling sentiment index in the east China market was 2.84, up 0.02 WoW; the purchasing sentiment index was 2.76, up 0.03 WoW. SMM A00 aluminum closed at 22,050 yuan/mt, up 160 yuan/mt from the previous trading day, at a discount of 110 yuan/mt against the 2601 contract, up 10 yuan/mt from the previous trading day, and at a discount of 50 yuan/mt against the 2512 contract. Last Friday, with higher premiums and discounts accompanied by a pullback in aluminum prices, selling sentiment in the central China market rebounded noticeably. However, downstream purchase willingness remained weak, with just-in-time procurement still the main theme. A large volume of spot cargo circulated in the market, and traders continued to lower their offers. Ultimately, actual transaction prices hovered between a discount of 10 yuan and a premium of 40 yuan against the central China price. Last Friday, the selling sentiment index in the central China market was 2.65, up 0.04 WoW; the purchasing sentiment index was 2.78, flat WoW. SMM central China closed at 21,980 yuan/mt, up 160 yuan/mt from the previous trading day, at a discount of 180 yuan/mt against the 2601 contract, up 10 yuan/mt from the previous trading day, and at a discount of 120 yuan/mt against the 2512 contract. The price spread between Henan and Shanghai was -70 yuan/mt, flat from the previous trading day.
Recycled Aluminum Raw Materials:Last Friday, spot primary aluminum prices rose compared to the previous trading day, with SMM A00 spot closing at 22,050 yuan/mt. The aluminum scrap market followed the increase collectively. Some scrap utilization enterprises reported high inventories of wrought aluminum alloy scrap collected during the peak season, lacking sufficient orders on hand to hedge against raw material inventories, thus temporarily slowing the procurement pace for related scrap. Additionally, environmental protection-driven production restrictions in Chongqing affected the operating rates of alloy enterprises, leading to a slight weakening in downstream aluminum scrap demand. Imported aluminum scrap market faced tight raw material supply, with traders mostly maintaining low inventory levels. However, a narrow pullback in aluminum prices mid-week led to a decline in aluminum scrap prices. Some aluminum scrap suppliers held prices firm and were reluctant to sell, while downstream alloy enterprises also faced tight supply of recycled aluminum raw materials. Last Friday, baled UBC was quoted in a range of 16,450-16,950 yuan/mt (tax excluded), and shredded aluminum tense scrap (priced based on aluminum content) was quoted in a range of 18,300-18,850 yuan/mt (tax excluded). Prices for baled UBC, clean tapping aluminum wire, mixed aluminum extrusion scrap free of paint, mechanical casting aluminum scrap, scrap motorcycle wheel, and mixed aluminum tense scrap increased by 100 yuan/mt WoW. In terms of the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and shredded aluminum tense scrap closed at 1,999 yuan/mt on December 11, and the price difference between A00 aluminum and bare bright aluminum wire in Jiangsu was 899.4 yuan/mt. Next week, the aluminum scrap market is expected to hover at highs, with shredded aluminum tense scrap (priced based on aluminum content) forecast to trade mainly in the range of 18,500-19,200 yuan/mt (tax excluded). The tight supply situation remains difficult to change, with constraints on imports and recycling persisting, providing a floor for prices. On the demand side, the year-end push for targets in the secondary aluminum sector and the dampening effect of high prices are intertwined, leading to cautious purchasing by scrap utilization enterprises in extrusion and rolling sectors due to price aversion. The price trend of primary aluminum serves as the core guidance, coupled with the impact of environmental protection-driven production restrictions and transportation constraints in central China, resulting in a cautious market sentiment. Overall, the tug-of-war between sellers and buyers continues, necessitating close monitoring of fluctuations in primary aluminum prices, environmental protection policies, and downstream procurement pace, while remaining vigilant against the risk of a high-level correction.
Secondary Aluminum Alloy:Futures side, the most-traded cast aluminum alloy futures contract 2602 opened at 21,105 yuan/mt last Friday, maintaining a fluctuating trend at highs during the day. By the midday close, the contract reached a high of 21,210 yuan/mt and a low of 21,080 yuan/mt, closing at 21,125 yuan/mt, down 5 yuan/mt or 0.02% from the previous close. Bulls mainly reduced their positions. Spot side, SMM A00 aluminum spot prices rose by 160 yuan/mt to 22,020 yuan/mt last Friday, while ADC12 prices increased again by 150 yuan/mt to 21,750 yuan/mt. Aluminum prices regained the 22,000 yuan/mt level last Friday. Rapidly rising raw material quotes prompted secondary aluminum plants to continue adjusting prices, with market offers generally up 100-200 yuan/mt from the previous day. Sharp price fluctuations during the week heightened downstream wait-and-see sentiment, leading to cautious procurement by die-casting enterprises and moderate market activity. Although year-end terminal demand provided some support, signs of marginal weakening in demand have emerged. Supply side, constrained by environmental protection policies and cost pressures, the operating rate in the secondary aluminum industry saw a periodic decline. Overall, the current secondary aluminum alloy market is characterized by intertwined bullish and bearish factors: on one hand, the tight supply of aluminum scrap persists, and although cost support has weakened, it still provides a fundamental floor for the market; on the other hand, marginal weakening in demand combined with high and fluctuating aluminum prices jointly suppress downstream procurement enthusiasm, while the decline in industry operating rates results in a tight supply-demand balance. ADC12 prices are expected to continue moving sideways at high levels in the short term, with close attention needed on aluminum price trends, aluminum scrap supply, and actual changes in downstream orders. Import side, current overseas ADC12 offers remain stable at $2,620–2,640/mt. Due to the rapid rebound in domestic prices, the immediate import loss has narrowed to around 200 yuan/mt.
Aluminum Market Summary:Despite a relatively favorable macro atmosphere, short-term positives have failed to offset the pressure from fundamentals and capital flows. Domestically, the Central Economic Work Conference confirmed the continuation of proactive fiscal policy next year and emphasized the sustained development of artificial intelligence and new-type energy system construction. This provides a boost to medium and long-term demand for aluminum in high-end manufacturing and green energy sectors. The consumption promotion plan issued by six departments including the MIIT also points to a positive policy environment. Overseas, as inflation trends and the strength of the labour market remain unclear, the market faces uncertainty regarding the direction of US monetary policy next year. Traders expect two interest rate cuts in 2026, while policymakers anticipate only one cut next year and one in 2027. In terms of supply, domestic operating aluminum capacity currently stands at 44.39 million mt, with operating capacity increasing slightly amid high profits, though overall changes remain relatively small. On the demand side, although December is a traditional consumption off-season, consumption in industries such as automobiles, power, and electronics shows strong resilience without exceeding seasonal weakness, and the proportion of liquid aluminum remains high; delayed shipments of aluminum ingots from Xinjiang coupled with resilient consumption of aluminum semis have temporarily prevented social inventory from entering a phase of continuous buildup. Cost side, alumina prices continue to decline, while auxiliary material prices remain generally stable, leading to weakened cost support. Overall, aluminum market supply increases slightly, demand performance is weak, cost support weakens, and coupled with the realization of interest rate cut expectations triggering profit-taking by funds, SMM expects aluminum prices to maintain a high level with a slight pullback in the short term.
[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions cautiously and not use this to replace independent judgment. Any decisions made by clients are unrelated to SMM.]
