Futures: On the night session of November 4, the most-traded SHFE aluminium contract opened higher but came under pressure and pulled back, then moved into consolidation, generally holding steady at high levels. The 2512 contract opened at RMB 21,395 per tonne, hit a high of RMB 21,440 per tonne and a low of RMB 21,335 per tonne, and closed at RMB 21,405 per tonne, down 0.28 per cent from the previous close. From a technical perspective, the MA moving average system showed a bullish alignment (MA5: 21,403 > MA10: 21,320 > MA20: 21,140.25 > MA60: 20,845.83), and the MACD 4-hour candlestick maintained a golden cross (DIFF: 125.94, DEA: 115.85). In terms of trend, although prices at the night session pulled back from the intraday high, they ultimately closed at RMB 21,405 per tonne, above most short-term moving averages, indicating that the current upward trend has not been technically broken, but short-term pullback risks still need attention.
Macro Front: The central bank announced that to maintain ample liquidity in the banking system, it conducted RMB 700 billion in outright reverse repo operations on November 5, with a maturity of 3 months (91 days). (Bullish ★) The US Senate again failed to pass a temporary funding bill for the federal government on the 4th, setting a record for the federal government shutdown. (Neutral) Federal Reserve Governor Milan once again publicly called for more aggressive interest rate cuts. Fed Governor Cook stated that inflation remains high and faces upside risks, and a rate cut in December is possible but will depend on subsequent incoming information. (Neutral)
Fundamentals: Inventory side, according to SMM statistics, the combined aluminium ingot inventory in three domestic regions stood at 475,500 tonne on November 4, up 2,500 tonne from the previous period; the combined aluminium billet inventory in two regions was 100,000 tonne, with a slight inventory buildup of 500 tonne from the previous period. With the growth of in-transit inventory and environmental protection-driven production restrictions suppressing demand, inventory is expected to build up again.
Primary aluminium market: Yesterday, the SHFE aluminium early session trading center shifted lower. Before 9:45, SHFE aluminium fluctuated with changes, generally trading above RMB 21,500 per tonne; around 9:45, futures prices pulled back to around RMB 21,410–21,450 per tonne. In East China, with absolute prices remaining high, downstream purchasing was weak, but the high prices at the open stimulated holders to actively sell, increasing market circulating supply. The discount for actual transactions widened, mainly around a discount of RMB 20–10 per tonne to the SMM average price; after futures prices fell, selling enthusiasm did not fade, and actual transactions failed to turn into a premium, while downstream purchasing enthusiasm did not show a significant rebound. This Tuesday, the selling sentiment index in the East China market was 2.9, down 0.12 WoW; the purchasing sentiment index was 2.88, down 0.13 WoW.
On Tuesday, SMM A00 aluminium closed at RMB 21,440 per tonne, flat from the previous trading day, at a discount of about RMB 10 per tonne against the 2511 contract, down RMB 10 per tonne from the previous trading day. In central China, before the market opened on Tuesday, prices were mainly at parity with the central China benchmark, but high aluminium prices led to sluggish trading, with sellers mainly adopting a wait-and-see approach. After the market opened, buying sentiment saw a slight rebound, as traders engaged in hedging and stockpiling, but downstream market transactions remained weak, with enterprises reducing raw material stockpiling and purchasing mainly for rigid demand. Buyers preferred to purchase at large discounts, but transactions were limited, and the actual transaction prices were mainly at a discount of RMB 10 per tonne to the central China benchmark.
On Tuesday, the selling sentiment index in the central China market was 2.9, up 0.01 MoM, while the purchasing sentiment index was 2.8, down 0.01 MoM. SMM central China aluminium closed at RMB 21,290 per tonne, down RMB 10 per tonne from the previous trading day, at a discount of RMB 160 per tonne against the November contract, down RMB 20 per tonne from the previous trading day. The price spread between Henan and Shanghai was -RMB 150 per tonne, down RMB 10 per tonne from the previous trading day.
Recycled aluminium raw materials: On Tuesday, spot primary aluminium prices rose compared to the previous trading day, with SMM A00 aluminium closing at RMB 21,440 per tonne. Aluminium scrap prices followed the upward trend of aluminium prices. As the traditional peak season ended, downstream demand showed significant divergence. Demand for aluminium scrap used in cast aluminium alloys remained stable, providing more consumption support, while demand for aluminium scrap used in wrought aluminium alloys began to show signs of weakening. However, tight market supply remained the main theme, keeping procurement prices high, though the sustainability of these high levels remains to be seen. On Tuesday, baled UBC was quoted in the range of RMB 16,100–16,750 per tonne (ex-tax), and shredded aluminium tensile scrap (priced based on aluminium content) was quoted in the range of RMB 17,900–18,250 per tonne (ex-tax). Prices for baled UBC, shredded aluminium tensile scrap (priced based on aluminium content), scrap wheel hubs, and mechanical casting aluminium scrap held steady MoM.
On Tuesday, spot aluminium prices remained stable, and aluminium scrap prices in major producing regions were largely unchanged. In terms of the price difference between A00 aluminium and aluminium scrap, the price difference between A00 aluminium and mechanical casting aluminium scrap in Shanghai was recorded at RMB 2,702 per tonne, while the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan widened to RMB 2,326 per tonne, up RMB 10 per tonne from the previous trading day. The aluminium scrap market is expected to hold up well this week, with the mainstream price range for shredded aluminium tensile scrap (priced based on aluminium content) potentially shifting upward to RMB 18,000–18,500 per tonne. If primary aluminium prices continue to rise, it will further transmit positive effects, coupled with the restocking demand of secondary aluminium enterprises amid low inventories, making it difficult to change the short-term tight supply pattern.
Demand side, the end of the traditional peak season and environmental protection-driven production restrictions, suppressing demand for wrought aluminium alloy scrap, may exacerbate market divergence. Close attention should be paid to the procurement pace of raw materials by secondary aluminium enterprises as they enter the off-season and the sustainability of end-user orders. If primary aluminium prices retreat after a rapid rise, the aluminium scrap market will face downward pressure, especially for wrought aluminium alloy scrap varieties, which are at greater risk due to environmental protection-driven production restrictions. Overall, the market is expected to continue the tug-of-war between sellers and buyers, and it is advisable to closely monitor the movement of primary aluminium prices and policy developments.
Secondary aluminium alloy: On Tuesday, aluminium prices ended their consecutive gains, with SMM A00 aluminium spot prices holding steady at RMB 21,440 per tonne. In the secondary aluminium market, ADC12 prices remained stable at RMB 21,400 per tonne. Due to fear of high prices, downstream buyers showed limited willingness to rush to buy amid continuous price rise, leading to weaker market transactions and a slight accumulation of finished product inventories at some enterprises. Raw material supply remained tight, keeping procurement costs for secondary aluminium plants elevated. Coupled with support from the supply side, ADC12 prices may hold up well in the short term.
Aluminium market summary: On the macro front, the central bank conducted outright reverse repo operations to support the economy, while the US federal government shutdown is set to break records, leading the US Fed to adopt a more cautious stance with higher thresholds for subsequent interest rate cuts amid a lack of data. Supply side, domestic operating aluminium capacity saw limited changes. Overseas, aluminium smelters cut production by 210,000 tonnes, with further cuts expected in March 2026, reigniting concerns over tight supply. In the medium term, attention will be on the ramp-up of aluminium projects in Indonesia. Demand side, as aluminium prices fluctuate at highs and severe smog in central China has prompted the rollout of environmental protection-driven production restriction policies, demand has been somewhat suppressed. Additionally, high LME aluminium prices have closed the processing trade window, weakening demand for aluminium semis exports. Monitoring the destocking cycle of finished products at downstream processors amid high aluminium prices is key. Overall, with aluminium prices at elevated levels, downstream processing enterprises are prioritising destocking of finished product inventories, leading to weaker demand for raw materials. However, aluminium ingot inventories remain relatively low, limiting fundamental drivers for aluminium prices in the short term, while macro sentiment both domestically and overseas remains relatively optimistic.
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.
Responses
