Futures: SHFE aluminium closed at RMB 21,960 per tonne in the night session, up a slight 0.18 per cent. Prices moved narrowly close to MA5 (21,959) and MA10 (21,958), with short-term moving averages flattening out, staying above MA60 (21,941.08), indicating a slightly stronger structure. The MACD dual lines were above the zero axis (DIF 4.4673, DEA 4.3754), but the histogram was only 0.1838, suggesting weak upward momentum.
Image source: World Economic Forum
The core trading range for SHFE aluminium is suggested at 21,800-22,100. LME aluminium closed at USD 2,862.5 per tonne, rebounding 0.60 per cent. Prices remained below all major moving averages, with MA5 (2,867.50) acting as short-term resistance. The MACD dual lines were below the zero axis (DIF -0.8340, DEA -0.3347), with a histogram of -0.9985, indicating the bearish pattern remained unchanged, and market trading was sluggish. The core trading range for LME aluminium is suggested at 2,840-2,900.
Macro front: Early this morning, the US Fed's FOMC announced after its meeting a 25-basis-point interest rate cut, lowering the target range for the federal funds rate to 3.50-3.75 per cent. This was the Fed's third rate cut this year, following cuts on September 17 and October 29, each by 25 basis points. (Bullish★) Data released by the National Bureau of Statistics (NBS) showed China's November CPI rose 0.7 per cent Y-o-Y, the highest since March 2024. (Bullish★)
Fundamentals: Domestically, individual new aluminium projects began powering up pots, leading to a slight increase in operating capacity and a small rise in weekly production. Overseas, new aluminium projects in Indonesia were ramping up production, with supply expected to increase M-o-M. Regarding the proportion of liquid aluminium, last week's SMM weekly proportion recorded 76.6 per cent, down 0.26 percentage points W-o-W.
As the off-season deepened, downstream operating rates showed a marginal declining trend, with aluminium billet enterprises expected to implement more production cuts in December. On inventory, according to SMM statistics, domestic mainstream consumption area aluminium ingot inventory recorded 583,000 tonnes this Monday, destocking 12,000 tonnes compared to last Monday. On one hand, aluminium ingot transportation in Xinjiang faced seasonal resistance with tight transport capacity, expected to cause some accumulation in Xinjiang. On the other hand, high absolute prices reduced downstream purchase willingness, likely affecting warehouse withdrawals.
Primary aluminium market: In the morning session, the SHFE aluminium December contract fluctuated upward, but the absolute price pulled back compared to the previous trading day. Market sentiment in East China recovered, with downstream maintaining just-in-time procurement, while traders actively purchased. Spot discounts were significant, holders held prices firm and were reluctant to sell, with actual transactions mainly at parity to a premium of RMB 10 per tonne against the SMM average price, showing signs of narrowing spot discounts.
On Wednesday, the sales sentiment index in the east China market was 2.71, up 0.09 M-o-M; the purchase sentiment index was 2.63, up 0.03 M-o-M. SMM A00 aluminium closed at RMB 21,770 per tonne, down RMB 110 per tonne from the previous trading day, at a discount of RMB 90 per tonne against the December contract, flat from the previous trading day.
On Wednesday, trading activity in the central China market held steady. As futures prices pulled back, downstream purchase willingness rebounded. However, with wide premiums/discounts and inter-month spreads, most holders adopted a wait-and-see stance. Market supply was tight, leading buyers to raise prices successively, pushing market offers higher. Actual transaction prices eventually ranged from a premium of 10 RMB to a premium of 50 RMB over the central China price.
On Wednesday, the sales sentiment index in the central China market was 2.78, down 0.08 M-o-M; the purchase sentiment index was 2.79, up 0.01 M-o-M. SMM central China aluminium closed at RMB 21,660 per tonne, down RMB 80 per tonne from the previous trading day, at a discount of RMB 200 per tonne against the December contract, up RMB 30 per tonne from the previous trading day. The Henan-Shanghai price spread was RMB 110 per tonne, up RMB 30 per tonne from the previous trading day.
Recycled aluminium raw materials: On Wednesday, spot primary aluminium prices fell from the previous trading day, with SMM A00 aluminium closing at RMB 21,770 per tonne. The aluminium scrap market followed the decline. Entering December, downstream demand for aluminium scrap showed clear divergence. Demand for scrap used in cast aluminium alloys remained stable with a slight increase, providing more support for consumption.
In Henan, intensified year-end environmental inspections and transport restrictions affected delivery efficiency. Meanwhile, some scrap utilisation enterprises reported high inventories of extrusion scrap collected during the peak season, lacking sufficient orders on hand to hedge raw material inventories, leading to a temporary slowdown in the procurement of extrusion scrap. On Wednesday, baled UBC was quoted in a range of RMB 16,250-16,750 per tonne (ex-tax), while shredded aluminium tense scrap (priced based on aluminium content) was quoted in a range of RMB 18,100–18,650 per tonne (ex-tax).
Prices for baled UBC, clean tapping aluminium wire, mixed aluminium extrusion scrap free of paint, mechanical casting aluminium scrap, scrap motorcycle wheel, and mixed aluminium tense scrap fell by RMB 100 per tonne M-o-M. In terms of the price difference between A00 aluminium and aluminium scrap, the price difference between A00 aluminium and shredded aluminium tense scrap closed at RMB 1,836 per tonne on December 5, while the price difference between A00 aluminium and bare bright aluminium wire in Jiangsu was RMB 888.1 per tonne.
The aluminium scrap market is expected to hover at highs this week, with shredded aluminium tense scrap (priced based on aluminium content) forecast in the range of RMB 18,500-19,200 per tonne (ex-tax). The tight supply situation is hard to reverse, with import and recycling constraints continuing to support prices. Demand side, the year-end push for targets by secondary aluminium producers and the dampening effect of high prices are intertwined, leading extrusion and rolling scrap utilisation enterprises to purchase cautiously amid high prices.
Primary aluminium price trends serve as the core guidance, coupled with the impact of environmental protection-driven production restrictions and transport constraints in central China, keeping market sentiment cautious. Overall, the tug-of-war between sellers and buyers continues, requiring close monitoring of primary aluminium fluctuations, environmental protection policies, and downstream procurement pace, while staying alert to the risk of a pullback from highs.
Secondary aluminium alloy: Futures, on Wednesday, the most-traded 2602 cast aluminium alloy futures contract opened at RMB 20,880 per tonne and fluctuated upward during the day. The futures surged in the afternoon, reaching a high of RMB 21,070 per tonne before pulling back, closing at RMB 20,930 per tonne, up RMB 60 per tonne or 0.29 per cent from the previous close. Trading volume was 4,157 lots, with open interest at 17,403 lots. Bulls slightly increased their positions but sentiment remained cautious. In the spot market, SMM A00 aluminium spot price decreased by RMB 110 per tonne to RMB 21,770 per tonne, while ADC12 prices fell by RMB 100 per tonne to RMB 21,500 per tonne.
With aluminium prices retreating from highs, cost support from aluminium scrap weakened, leading to overall pressure and a downward shift. The spot market showed a weak operating pattern. On the demand side, there were signs of weakening, and with a significant drop in aluminium futures this week, downstream enterprises' wait-and-see sentiment intensified, resulting in moderate trading activity.
Considering supply and demand as well as cost factors, ADC12 aluminium alloy prices are expected to continue in the doldrums in the short term. Imports, Southeast Asian market ADC12 quotes slightly decreased to USD 2,620-USD 2,640 per tonne. Due to the simultaneous decline in domestic prices, import losses remain around RMB 400 per tonne, keeping the theoretical import window closed.
Aluminium market summary: Macro positives have been realised, with the US Fed's third interest rate cut of the year, as expected, continuing its accommodative monetary policy stance. Coupled with an expanded Y-o-Y increase in China's November CPI, it somewhat alleviated concerns over domestic deflationary pressures, providing some support for aluminium prices on the macro sentiment level. However, the reality of weakening fundamentals is becoming clearer.
Fundamentals side, this year's Chinese New Year break is later, limiting the extent of the decline in electrolytic aluminium demand in December.
The new capacity production release will take time, with limited output growth in December. Although inventory levels declined, this was mainly due to transportation disruptions in Xinjiang, causing in-transit accumulation, rather than strong actual consumption. In summary, robust macro expectations and policy direction provide solid downside support, effectively limiting the depth of any aluminium price decline; however, upside room will be constrained by gradually weakening spot consumption. It is expected that prices will hover at highs in the short term, lacking sufficient momentum for further gains.
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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