Night session SHFE aluminium rises over 2 per cent, breaking through RMB 24,100 per tonne, multiple positive factors support aluminium prices to hold up well in the short term

Futures: During the night session on January 5, the most-traded SHFE aluminium 2602 contract opened at RMB 23,560 per tonne, reached a high of RMB 24,280 per tonne, touched a low of RMB 23,500 per tonne, and finally closed at RMB 24,165 per tonne, up RMB 520 per tonne or 2.20 per cent from the previous close. From a technical perspective, the MA moving averages showed a bullish alignment (MA5: 23,183.00 > MA10: 22,803.50 > MA20: 22,497.75 > MA40: 22,263.38), and the MACD 4-hour candlestick level continued to show a red bar (DIFF: 359.33, DEA: 195.19). In terms of open interest, the night session open interest was approximately 265,000 lots, an increase of 3,613 lots from the daytime session. LME aluminium opened at USD 3,024per tonne, reached a high of USD 3,093per tonne, touched a low of USD 3,023.5per tonne, and finally closed at USD 3,090per tonne, up 2.28 per cent from the previous day. Trading volume was 38,800 lots, an increase of 17,710 lots, while open interest was 682,000 lots, a decrease of 2,431 lots.

Macro front: On the afternoon of January 5, President Xi Jinping held talks with South Korean President Lee Jae-myung, who was on a state visit to China, at the Great Hall of the People in Beijing. Xi emphasised that the Chinese and South Korean economies are closely linked, with deeply embedded industrial and supply chains, and that cooperation is mutually beneficial. He called for enhanced strategic alignment and policy coordination to expand the pie of common interests and achieve more cooperative outcomes in emerging fields such as artificial intelligence, the green industry, and the silver economy. (Bullish ★) US manufacturing activity contracted more than expected in December, remaining in contraction for the 10th consecutive month. The Institute for Supply Management (ISM) said on Monday that new orders declined again and input costs continued to rise as the manufacturing sector continued to be affected by Trump's import tariffs. (Bearish ★) The US dollar index earlier hit its highest level since December 10, but then pulled back, ending the session down 0.3 per cent at 98.262. The dollar index fell 1.2 per cent in December, its weakest monthly performance since August. According to calculations, traders currently expect two interest rate cuts in the US this year. (Bullish ★)

Fundamentals: According to SMM data, the average tax-inclusive full cost for China's aluminium industry in December 2025 increased 0.7 per cent m-o-m but decreased 23.3 per cent y-o-y. During the period, raw material costs for alumina decreased, but power costs and auxiliary material costs rose, leading to a m-o-m increase in total costs. The Passenger Car Association posted on the 5th that sales in China's passenger NEV market are expected to grow by about 25 per cent in 2025. Based on comprehensive preliminary monthly association data, from December 1 to 31, national passenger vehicle producers' NEV wholesale sales reached 1.57 million units, up 4 per cent y-o-y but down 8 per cent m-o-m.

Primary aluminium market: In early trading, the SHFE aluminium 2601 contract rose significantly, with the price centre higher than the previous trading day. Overall, market trading volume rose as the year-end closing concluded, but the upward trend in sentiment was limited by rising SHFE aluminium prices. On Monday, mainstream transaction prices mainly ranged from a discount of RMB 10 per tonne to parity against the SMM average price. The selling sentiment index in east China was 2.08, up 0.09 w-o-w, while the purchasing sentiment index was 2.15, up 0.04 w-o-w. SMM A00 aluminium was quoted at RMB 23,310 per tonne, up RMB 850 per tonne from the previous trading day, at a discount of RMB 220 per tonne against the 2601 contract, down RMB 10 per tonne from the previous trading day.

On Monday, aluminium prices surged rapidly, but trading sentiment in central China remained sluggish. Downstream processing enterprises resumed operations after environmental protection-driven production restrictions ended, yet high absolute aluminium prices led to weak demand. Some companies had restocked slightly during the New Year holiday and were currently focused on consuming inventory, resulting in low trading volume. Traders purchased for hedging purposes, with buyers preferring large discounts, while major holders held prices firm on bullish views. Ultimately, actual transaction prices in central China ranged from a premium of RMB 10 per tonne to a discount of RMB 30 per tonne against the central China price. The selling sentiment index in central China was 2.49, down 0.18 w-o-w, while the purchasing sentiment index was 1.96, up 0.46 w-o-w. SMM central China aluminium price closed at RMB 23,080 per tonne, up RMB 840 per tonne from the previous trading day, at a discount of RMB 450 per tonne against the 2601 contract, down RMB 20 per tonne from the previous trading day. The price spread between Henan and Shanghai was -RMB 230 per tonne, down RMB 10 per tonne from the previous trading day.

Recycled aluminium raw materials: On Monday, spot primary aluminium prices rose from the previous trading day, with SMM A00 spot closing at RMB 22,460 per tonne, and the aluminium scrap market followed the upward trend. Some scrap utilisation enterprises reported a high inventory of wrought aluminium alloy scrap accumulated during the peak season, coupled with insufficient orders on hand to hedge raw material inventory, leading to a temporary slowdown in procurement pace for related scrap. As 2026 approaches, the implementation of resource recycling policies still faces obstacles, with issues such as natural persons and invoice limits remaining unresolved. Some recycling enterprises have already chosen to pass additional tax burdens to the aluminium scrap supply side, increasing the risk of downward pressure on aluminium scrap prices. On Monday, baled UBC was quoted at RMB 16,800-17,200 per tonne (ex-tax), while shredded aluminium tensile scrap (priced based on aluminium content) was quoted at RMB 18,400-18,900 per tonne (ex-tax). Prices in Shanghai, Zhejiang, Jiangsu, Tianjin, and Shandong increased by RMB 200-300 per tonne on Monday, while prices in Guizhou, Henan, Jiangxi, and Hubei rose by RMB 100 per tonne or remained largely stable. Regarding 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 3,084 per tonne on December 31, and the price difference between A00 aluminium and shredded aluminium tensile scrap was RMB 2,009 per tonne.

Domestic aluminium scrap prices are expected to hover at highs around the New Year holiday, but caution is advised against potential corrections from elevated levels. Supply side, the issue of tax burden shifting further affected the market supply structure. Demand side, stocking demand from secondary aluminium alloy enterprises ahead of the Chinese New Year continued to support procurement of aluminium tensile scrap, but signs of slowing demand from downstream die-casting enterprises became increasingly evident, coupled with wait-and-see sentiment due to aluminium price fluctuations, leading to a decline in overall demand support for prices. Policy-wise, uncertainty from repeated environmental protection-driven production restrictions in central China and Chongqing continued to suppress local demand in the short term. Price-wise, the centre for shredded aluminium tensile scrap (priced based on aluminium content) hovered at RMB 18,200–18,700 per tonne (tax excluded). Short-term focus should be on signals of the easing of environmental protection-driven production restriction policies, changes in procurement pace of downstream enterprises, and the impact of tax burden shifting on price floors.

Secondary aluminium alloy: Futures side, on Monday, the most-traded cast aluminium alloy contract 2603 opened at the day's low of RMB 21,875 per tonne. After opening, the price quickly surged to RMB 22,695 per tonne, approaching a 4.97 per cent gain at one point, then pulled back slightly and finally settled at RMB 22,520 per tonne, up RMB 665 per tonne or 3.04 per cent from the previous close. Trading volume was 11,820, and open interest was 18,299, with both volume and open interest increasing simultaneously, signaling clear bullish position building. The candlestick showed a large bullish breakout pattern, with moving averages providing strong support. Spot market, on Monday, aluminium and copper prices continued to rise sharply, again hitting multi-year highs. Among them, the SMM A00 aluminium price surged RMB 850 per tonne in a single day to RMB 23,310 per tonne, driving up raw material costs for secondary aluminium. The SMM ADC12 price followed with a RMB 650 per tonne increase to RMB 23,100 per tonne.

Post-holiday market activity resumed, but downstream demand remained weak in the face of sharp raw material price increases. Die-casting enterprises, squeezed by both order reductions and high raw material prices, adopted a cautious procurement approach with strong risk aversion, mainly restocking based on immediate needs, resulting in sluggish trading activity. Overall, although the secondary aluminium market has support from costs and supply, weak downstream demand, coupled with market fear of high price,s is likely to cap further price increases. In the short term, ADC12 prices are expected to fluctuate at highs. On the import side, current overseas ADC12 offers surged to the range of USD 2,780–2,820per tonne, with gains larger than in the domestic market, causing real-time import profits to shrink sharply to less than RMB 100 per tonne.

Aluminium market summary: Expectations for US Fed interest rate cuts continued to dominate the logic of a monetary easing cycle, providing strong support for nonferrous metal prices; a rebound in global risk appetite further improved the macro environment, helping aluminium prices break through previous trading ranges and rise sharply. Domestically, the fiscal work conference clarified that 2026 would see expanded fiscal spending and efforts to boost domestic consumption demand, with a focus on areas related to new quality productive forces; coupled with the implementation of the 2026 national subsidy plan and the allocation of supporting funds, policy efforts are concentrated on trade-in programs for consumer goods.

From a medium and long-term perspective, this is expected to continuously drive the release of downstream demand for aluminium, building a solid policy cushion expectation for industry demand. However, the demand side was significantly impacted by high-price suppression and environmental protection-driven production restrictions. In December, the operating rate of leading downstream processing enterprises declined, and the proportion of liquid aluminium dropped 0.8 percentage points m-o-m to 76.5 per cent, while end-use consumption showed a seasonal weakening trend. Overall, although the reality of pressured fundamental consumption and continuously accumulating inventory has exerted some downward pressure on the sustained rise in aluminium prices, strong macro policy expectations and geopolitical risk fluctuations have provided solid support for the upward movement of aluminium prices. SMM expects aluminium prices to hold up well in the short term.

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.