Futures: In the night session on December 23, the SHFE aluminium 2602 contract opened at RMB 22,290 per tonne, reached a high of RMB 22,305 per tonne, a low of RMB 22,055 per tonne, and closed at RMB 22,160 per tonne, down 0.16per cent. Trading volume was 164,000 lots, and open interest was 292,000 lots. Technical analysis showed the MA system in a bullish alignment (MA5: 22,143 > MA10: 22,053.5 > MA20: 22,012.25 > MA60: 21,527.42), with the medium and long-term uptrend intact. LME aluminium opened at USD2,943.5 per tonne, hit a high of USD2,966 per tonne, a low of USD2,926 per tonne, and finally closed at USD2,941 per tonne. Trading volume was 15,800 lots, an increase of 710 lots, and open interest was 681,000 lots, up 739 lots.
Macro front: Xi Jinping recently issued important instructions on the work of central state-owned enterprises. Xi emphasised that central SOEs should focus on their main responsibilities and businesses, continuously optimise the layout of the state-owned economy, and effectively enhance core functions and competitiveness. They should base their efforts on the real economy, strengthen breakthroughs in key core technologies, and promote the deep integration of technological innovation and industrial innovation. (Neutral) US Q3 GDP grew at its fastest pace in two years, reaching 4.3per cent, but the US consumer confidence index fell for the fifth consecutive month. Markets continued to bet on expectations for US Fed interest rate cuts next year, putting the US dollar under pressure and pushing it below the 98 level. (Bullish ★)
Fundamentals: Inventory side, according to SMM statistics, on December 23, the combined inventory of aluminium ingots in three domestic locations increased by 11,500 tonne from the previous period, with Wuxi inventory up 6,000 tonne and Gongyi inventory up 5,500 tonne. Meanwhile, the combined inventory of aluminium billets in two locations increased by 500 tonne from the previous period, with Guangdong inventory up 1,000 tonne and Wuxi inventory down 500 tonne.
Primary aluminium market: In the early session, the SHFE aluminium 2601 contract moved lower, with its price centred down from the previous day. The drop in aluminium prices did not boost trading sentiment in the eastern China market. Offers were mainly at a discount of RMB 20 per tonne to a premium of 10 per tonne against the SMM average price, with a discount of RMB 10 per tonne being the most concentrated. Approaching year-end, both selling and purchase sentiment in the market were weak.
The selling sentiment index in the east China market on Tuesday was 2.41, down 0.07 w-o-w; the purchase sentiment index was 2.38, down 0.17 w-o-w. The SMM A00 aluminium offer was RMB 21,870 per tonne, down RMB 60 per tonne from the previous trading day, at a discount of RMB 170 per tonne against the 2601 contract, unchanged from the previous day. Sentiment in the central China market was relatively better, with downstream purchase willingness improving slightly, though selling sentiment dropped back slightly. Influenced by the falling aluminium prices, market offers weakened initially, then stabilised, with final transaction prices ranging from a discount of RMB 40 per tonne to parity against the central China price. On Tuesday, the central China market sentiment index for shipments was 2.75, down 0.02 w-o-w, while the purchasing sentiment index was 2.43, up 0.14 w-o-w. The SMM aluminium price in central China closed at RMB 21,710 per tonne, down RMB 60 per tonne from the previous trading day, at a discount of RMB 330 per tonne against the 2601 contract, unchanged from the previous day. The Henan-Shanghai price spread stood at -RMB 160 per tonne, also remaining stable.
Recycled aluminium raw materials: On Tuesday, spot primary aluminium prices dropped back slightly compared to the previous trading day, with the SMM A00 spot price closing at RMB 21,870 per tonne. The overall aluminium scrap market saw minor adjustments. Some scrap utilization enterprises reported high inventories of wrought aluminium alloy scrap accumulated during the peak season, coupled with insufficient orders on hand to hedge against raw material stocks, leading to a temporary slowdown in procurement pace for related scrap materials. Additionally, recurring environmental protection-driven production restrictions in Chongqing slightly weakened aluminium scrap demand from downstream sectors. Secondary aluminium alloy scrap utilization enterprises indicated that as Chinese New Year stockpiling is expected to begin soon, they are currently conducting concentrated procurement of aluminium scrap raw materials, thus accelerating the procurement pace for aluminium tense scrap materials. On Tuesday, baled UBC scrap was centrally quoted at RMB 16,350-16,850 per tonne (tax excluded), while shredded aluminium tensile scrap (priced based on aluminium content) was centrally quoted at RMB 18,100-18,600 per tonne (tax excluded). Baled UBC prices were down RMB 50 per tonne w-o-w, while aluminium tense scrap prices in some regions such as Jiangxi, Guizhou, and Hunan remained stable on Tuesday.
The aluminium scrap market is expected to continue hovering at highs this week, with the mainstream range for shredded aluminium tensile scrap (priced based on aluminium content) projected at RMB 18,000-18,500 per tonne (tax excluded). The tight supply situation for aluminium scrap is difficult to reverse in the short term, and shortages of imported raw materials are providing a floor for prices. As pre-Chinese New Year stockpiling is about to commence, concentrated raw material procurement by some scrap utilization enterprises will offer some support to scrap demand. However, recurring environmental protection-driven production restrictions in central and south-west China are keeping market participants' sentiment cautious. Overall, the tug-of-war between sellers and buyers in the aluminium scrap market is expected to persist next week. Close attention should be paid to fluctuations in primary aluminium prices, the implementation of environmental protection-driven production restrictions, and changes in the procurement pace of downstream enterprises, while remaining vigilant against the risk of a pullback from highs.
Secondary aluminium alloy: On the futures side, the most-traded cast aluminium alloy contract 2602 opened at RMB 21,240 per tonne on Tuesday. After opening, it quickly dipped to a low of RMB 21,105 per tonne, then fluctuated and rebounded to a high of RMB 21,280 per tonne, finally closing at RMB 21,265 per tonne, up RMB 40 per tonne or 0.19per cent from the previous trading day. Bears mainly reduced their positions on the futures market. In the spot market on Tuesday, the SMM A00 aluminium price pulled back by RMB 60 per tonne to RMB 21,870 per tonne, while the ADC12 price held firm at RMB 21,800 per tonne. Aluminium prices edged down slightly on Tuesday, but the secondary aluminium market generally remained stable. Current raw material supply is tightening, coupled with secondary aluminium enterprises entering the stockpiling phase, leading to rising aluminium scrap demand.
Traders' sentiment to hold prices firm is evident, providing support to secondary aluminium costs. However, demand side marginally weakened, and overall market transactions performed sluggishly. In terms of supply, heavy pollution weather alerts were recently activated in many regions, leading some secondary aluminium enterprises to face production restrictions or shutdowns, resulting in a slight contraction in supply. Overall, cost support and supply tightening jointly solidify the price bottom, but demand slowdown and aluminium prices fluctuating at highs suppress downstream purchase willingness. ADC12 prices are expected to maintain a fluctuating trend at highs in the short term.
On the import side, current overseas ADC12 offers are at USD2,630-2,650 per tonne. Since December, driven by cost push and regional policy adjustments, domestic spot quotes have followed the rise to RMB 21,000-21,200 per tonne. Although the strengthening RMB and SHFE gains have led to a narrowing of the immediate import loss, the overall situation remains in an inverted range. Imports for December are expected to remain in the range of 70,000-80,000 tonnes, while the total import volume for the full year 2025 is expected to fall below 1 million tonnes, with a y-o-y decline of about 18per cent.
Aluminium market summary: Overall, on the macro front, domestic and overseas macro sentiment leans favourable, with market expectations for US Fed interest rate cuts strengthening, which is positive for base metal prices. From a fundamental perspective, the domestic fundamentals currently struggle to provide strong support for sustained aluminium price increases, as end-use demand is weak and the proportion of liquid aluminium subsequently declines. Overall, although fundamental driving forces are limited, the macro front, both domestically and overseas,s remains optimistic, and the pattern of aluminium prices fluctuating at highs remains unchanged.
Note: This article has been issued by SMM and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.
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