Macro front generally warmth contests inventory buildup reality, aluminium prices under pressure and fluctuating in the short term

Futures: SHFE aluminium closed at RMB 23,555 per tonne in the night session, down 0.08 per cent, with prices consolidating narrowly. It is currently above the MA5 (23,517) but suppressed by the MA10 (23,633), with short-term moving averages still in a bearish alignment; medium to long-term, it stands firmly above the MA60 (23,038.42), with the bottom support intact. The MACD indicator shows the DIF (2.9912) and DEA (152.2313) maintaining a death cross, with the histogram deeply negative at -298.4803, indicating strong bearish momentum. The core trading range for SHFE aluminium is suggested at 23,300-23,800.

LME aluminium closed at USD 3,117 per tonne in the night session, up 0.39 per cent. The price is above the MA5 (3,097.60) and MA10 (3,107.15) but under pressure from the MA30 (3,129.87), with short-term moving average resistance remaining; medium to long-term, it operates above the MA60 (3,003.46), showing a relatively stable trend structure. The MACD indicator shows the death cross between DIF (11.3522) and DEA (24.6329) converging, with the negative histogram narrowing to -26.5615, indicating weakening downward momentum. The core trading range for LME aluminium is suggested at 3,090-3,140.

Macro front: Data released by the National Bureau of Statistics (NBS) showed that in January, China's CPI rose 0.2 per cent m-o-m and 0.2 per cent y-o-y, while core CPI increased 0.8 per cent y-o-y; PPI rose 0.4 per cent m-o-mmarking the fourth consecutive monthly increase, with the growth rate expanding by 0.2 percentage points from the previous month, but fell 1.4 per cent y-o-y, with the decline narrowing by 0.5 percentage points from the previous month. 

The released CPI and PPI data use 2025 as the base period, representing the first data release after this base period rotation. The NBS pointed out that this base period rotation had an average impact of approximately 0.06 and 0.08 percentage points on the monthly y-o-y indices of CPI and PPI, respectively, which is relatively small overall. (Bullish ★) US seasonally adjusted non-farm payrolls increased by 130,000 in January, far exceeding market expectations of 70,000, while the previous figure was slightly revised down to 48,000. The unemployment rate recorded 4.3 per cent, the lowest since August 2025; average hourly earnings grew 0.4 per cent m-o-mexceeding expectations. Kansas City Fed President Schmid stated that inflation remains above target levels and a "slightly restrictive" interest rate stance should be maintained. Traders delayed their bets on a US Fed interest rate cut from June to July. US President Trump praised the strong January non-farm payrolls performance in a post, again calling for significant interest rate cuts, stating that the US should enjoy the world's lowest interest rates. (Bullish ★)

Fundamentals: Supply side, the ramp-up of new aluminium projects domestically and overseas is pushing up the daily average production. Demand side, on the production front, as the Chinese New Year holiday approaches, downstream processing enterprises have begun holidays successively, leading to a decline in operating rates and weakening demand; the proportion of liquid aluminium decreased by 8.6 percentage points w-o-w last week. On the trading front, after the absolute price of aluminium declined, traders' bullish sentiment supported increased procurement, spot discounts narrowed, and transactions showed slight signs of recovery. However, the trend of social inventory buildup remained unchanged, with Thursday's inventory increasing by 35,000 tonnes compared to Monday. Inventory pressure gradually rose, and the post-Chinese New Year holiday social inventory peak is expected to hit a new high in nearly three years.

Primary aluminium market: In early trading, the SHFE aluminium 2602 contract fluctuated with slight gains, though the price centre edged lower compared to the previous trading day. Affected by the approaching Chinese New Year, overall market sentiment was weak, with mainstream transactions concentrated at the average price to a premium of RMB 10 per tonne. On Wednesday, the East China market shipment sentiment index was 2.3, down 0.4 w-o-w; the purchasing sentiment index was 2.29, down 0.21 w-o-w. 

SMM A00 aluminium was quoted at RMB 23,260 per tonne, down RMB 30 per tonne from the previous trading day, at a discount of RMB 190 per tonne against the 2602 contract, flat from the previous day. Wednesday's central China market transactions remained sluggish. As the Chinese New Year approached, pre-holiday stockpiling by downstream processing enterprises had largely ended, with only minimal just-in-time procurement. Major suppliers also gradually entered the Chinese New Year holiday, leading to scarce spot supply in the market. However, some traders bought the dip and stockpiled, driving transaction prices higher from a premium of RMB 10 per tonne to the central China price before opening to a premium of RMB 50 per tonne. 

The main transaction range was between a premium of RMB 10 per tonne and RMB 30 per tonne to the central China price. Wednesday's central China market shipment sentiment index was 2.56, down 0.16 w-o-w; the purchasing sentiment index was 2.14, down 0.02 w-o-w. SMM central China price closed at RMB 23,160 per tonne, down RMB 10 per tonne from the previous trading day, at a discount of RMB 290 per tonne against the 2602 contract, up RMB 20 per tonne from the previous day. The Henan-Shanghai price spread was -RMB 100 per tonne, narrowing by RMB 20 per tonne from the previous day.

Secondary aluminium raw materials: On Wednesday, spot primary aluminium prices edged down slightly compared to the previous trading day, with SMM A00 spot closing at RMB 23,260 per tonne. Aluminium scrap prices held steady overall on Wednesday. Baled UBC was mainly offered at RMB 16,800-17,250 per tonne (ex-tax), while shredded aluminium tensile scrap (priced based on aluminium content) was mainly offered at RMB 19,000-19,700 per tonne (ex-tax). 

In terms of the price difference between A00 aluminium and aluminium scrap, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was RMB 3,523 per tonne on February 11, and the price difference between A00 aluminium and shredded aluminium tensile scrap was RMB 2,716 per tonne. Recently, directly impacted by recycling policies and forced to follow higher aluminium prices, the market has shown a situation of "nominal prices without actual transactions." Scrap utilisation enterprises in related provinces were forced to reduce or halt production, and downstream buying sentiment was dampened, leading to purchasing as needed. Aluminium scrap prices are expected to hover at highs this week, with shredded aluminium tensile scrap (priced based on aluminium content) mainly trading in the range of RMB 19,000-19,800 per tonne (ex-tax). Before the holiday, repeated environmental protection-related controls in Anhui, Henan, Hebei, and other regions, combined with high aluminium prices, provided bottom support for aluminium scrap prices. 

Suppressed demand forced scrap utilisation enterprises and aluminium scrap yards to enter the holiday early, making it difficult to change the "nominal prices without actual transactions" pattern, and the overall tug-of-war between sellers and buyers continued. It is essential to closely monitor the shutdown and production resumption of downstream processing enterprises, as well as the progress of environmental protection enforcement in various regions, and remain vigilant against the risk of continued sluggish trading in the aluminium scrap market following another aluminium price correction.

Secondary aluminium alloy: Futures side, the most-traded A2604 futures contract showed a pattern of falling first and then rising during the day. After hitting a bottom of RMB 22,080 per tonne in the morning session, it gradually rebounded and fluctuated at highs in the afternoon before closing at RMB 22,205 per tonne, up RMB 70 per tonne or 0.32 per cent from the previous close, with bulls mainly increasing their positions. This reflects a technical recovery after the previous sharp decline, but the overall trend has not yet reversed. Spot market side, A00 aluminium price edged down RMB 30 per tonne from the previous trading day to RMB 23,260 per tonne, while the SMM ADC12 price held steady at RMB 23,650 per tonne. As the Chinese New Year approaches, enterprises across the secondary aluminium industry chain are entering a concentrated holiday period, leading to a noticeable decline in market liquidity. Actual transactions remain sluggish, and spot quotations are mostly adjusted slightly in line with futures movements. Supply side, secondary aluminium enterprises are gradually halting production, with most furnace shutdowns scheduled between February 5 and 13. Production resumptions are mostly planned around the eighth day of the first lunar month or the Lantern Festival. The shutdown period is expected to last 8–20 days, generally longer y-o-y. Against the backdrop of unchanged demand, fundamental support for prices continues to weaken. The price centre for secondary aluminium alloy is slowly shifting downward before the holiday, and in the short term, prices are expected to remain in the doldrums with limited upside.

Aluminium market summary: Macro front, domestic January CPI and PPI data indicated a mild rebound in price levels. PPI rose for the fourth consecutive month m-o-mand the y-o-y decline narrowed, reflecting marginal improvement in industrial demand and providing macro support for base metals such as aluminium. US non-farm payrolls far exceeded expectations, demonstrating strong economic resilience. Although expectations for interest rate cuts have been delayed, market concerns about growth prospects have eased, and Trump has again called for significant rate cuts, boosting overall macro sentiment. However, fundamentals are facing typical seasonal weakening pressures. Supply side, newly commissioned aluminium projects domestically and overseas continue to ramp up production, with daily average production maintaining an upward trend, sustaining supply pressure. 

Demand side has entered the pre-holiday off-season, as downstream processing enterprises gradually shut down for the holiday, leading to a decline in operating rates and noticeably weaker consumption from the production side. The current aluminium ingot inventory buildup is accelerating, and the market expects post-holiday inventory peaks to hit multi-year highs. Visible inventory pressure is gradually becoming a key real-world factor weighing on aluminium prices. In summary, aluminium prices are expected to remain under pressure in the short term, capped by inventory buildup realities but supported by macro expectations. Prices are likely to stay in the doldrums with limited room for rebound.

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.