Seasonal weakness pressure dominates aluminium prices in the doldrums

Futures: Last night session, SHFE aluminium closed at RMB 23,525 per tonne, down 0.06per cent, fluctuating rangebound near the MA5 (23,544). The short-term moving average system showed a bearish alignment, with prices under pressure below the MA10 (24,035.5) and MA30 (24,006.17), but medium and long-term, it remained above the MA60 (22,972.33), indicating the structure was not fully weak. 

The MACD indicator's DIF (41.8834) and DEA (230.9414) maintained a death cross, with the histogram deeply negative (-378.1158), suggesting bearish momentum still dominated. The core trading range for SHFE aluminium is suggested at 23,300-23,800. LME aluminium closed at USD 3,109per tonne in the night session, down 0.67per cent, fluctuating around the MA5 (3,086.8) but still constrained by the MA10 (3,122.2) and MA30 (3,125.65), with significant short-term moving average pressure; medium and long-term, it held above the MA60 (2,999.22). The MACD indicator's DIF (12.4642) and DEA (28.0169) continued in a death cross state, with the histogram negative (-31.1055), indicating the bearish pattern remained unchanged. The core trading range for LME aluminium is suggested at 3,080-3,140.

Macro front: US National Economic Council Director Hassett stated that US job growth data is expected to show a slowdown, but this does not indicate a weakening economic momentum; rather, it reflects structural changes in the labour market. The January non-farm payroll report is due Wednesday, with the market expecting an increase of about 70,000 jobs. (Neutral) The Ministry of Commerce held a symposium with automakers to study work related to automobile circulation and consumption. In 2026, China will optimise the implementation of the auto trade-in policy, conduct pilot reforms in auto circulation and consumption, improve industry management systems, and take multiple measures to promote the expansion and quality improvement of auto consumption. (Bullish)

Fundamentals: Supply side, the ramp-up of newly commissioned aluminium projects domestically and overseas pushed up the daily average production. Demand side, production-wise, with the Chinese New Year holiday approaching, downstream processing enterprises began holidays successively, leading to a decline in operating rates and weakening demand; the proportion of liquid aluminium dropped 8.6 percentage points WoW. Trading-wise, after the absolute aluminium price fell, traders' bullish sentiment supported increased procurement, spot discounts narrowed, and transactions showed a slight recovery. However, the social inventory buildup trend continued, with Monday's inventory up 21,000 mt WoW from last Thursday, inventory pressure gradually increasing, and the post-holiday social inventory peak is expected to hit a new high in nearly three years.

Primary aluminium market: In the morning session, SHFE aluminium 2602 fluctuated upward, with the price centre higher than the previous trading day. Affected by the rising aluminium price and the approaching holiday, overall market procurement sentiment was weak, prompting sellers to lower prices, with mainstream transactions concentrated at discounts of RMB 10-30 per tonne.

On Monday, the shipment sentiment index in the east China market was 2.78, down 0.06 WoW; the buying sentiment index was 2.68, down 0.18 WoW. SMM A00 aluminium closed at RMB 23,400 per tonne, up RMB 260 per tonne from the previous trading day, at a discount of RMB 170 per tonne against the 2602 contract, down RMB 20 per tonne from the previous trading day. On Monday, trading in the central China market was mainly sluggish. As the Chinese New Year holiday approached, pre-holiday stockpiling by downstream processing enterprises was basically completed, with only a small amount of just-in-time procurement and some traders buying the dip to stockpile. 

Suppliers initially showed a strong willingness to hold prices firm, but weaker transactions led to continuously lower prices. Eventually, the actual transaction prices in the central China market hovered around a premium of RMB 10 per tonne to a discount of RMB 30 per tonne against the central China price. On Monday, the shipment sentiment index in the central China market was 2.73, up 0.04 WoW; the buying sentiment index was 2.17, flat WoW. SMM central China price closed at RMB 23,280 per tonne, up RMB 250 per tonne from the previous trading day, at a discount of RMB 290 per tonne against the 2602 contract, down RMB 30 per tonne from the previous trading day. The price spread between Henan and Shanghai was -RMB 120 per tonne, widening by RMB 10 per tonne from the previous trading day. Secondary aluminium Raw Materials: On Monday, spot primary aluminium prices rose compared to the previous trading day, with SMM A00 spot aluminium closing at RMB 23,400 per tonne. 

Aluminium scrap prices generally followed the increase on Monday. On Monday, 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). 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 3,543 per tonne on February 9, and the price difference between A00 aluminium and shredded aluminium tensile scrap was RMB 2,736 per tonne. Recently, directly affected by recycling policies and forced to follow the rise in aluminium prices to highs, 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 significantly 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 fluctuating 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 pattern of "nominal prices without actual transactions." The overall tug-of-war between sellers and buyers continues. It is necessary to closely track the production halts and resumptions of downstream processing enterprises and the progress of environmental protection enforcement in various regions, and be alert to the continued sluggish trading atmosphere in the aluminium scrap market if aluminium prices pull back again.

Secondary aluminium alloy: Futures side, the most-traded 2604 secondary aluminium alloy futures contract showed a pattern of retreating after a rapid rise during the day. It opened slightly higher in the early session and fluctuated upward, hitting a high of RMB 22,330 per tonne, but faced significant pressure at highs, followed by a price pullback. In the afternoon, influenced by increased bearish positions, it dipped to the RMB 22,160 per tonne level, consolidated at lows toward the close, and finally settled at RMB 22,165 per tonne, recording a slight intraday decline, with market sentiment turning cautious. 

In the spot market, the price of A00 aluminium rose by RMB 260 per tonne from the previous trading day to RMB 23,400 per tonne, while the SMM ADC12 price increased by RMB 100 per tonne to RMB 23,650 per tonne. Entering the final trading week before the Chinese New Year, as upstream and downstream enterprises in the secondary aluminium industry gradually began holidays, market transactions noticeably slowed, and enterprise quotations were mostly adjusted in line with market conditions. On the production side, most secondary aluminium enterprises suspended operations between February 5 and 13, with resumption times concentrated around the eighth day of the first lunar month or the Lantern Festival. The average shutdown period is expected to last 8–20 days, about 2 days longer YoY. Overall, downstream demand continues to contract, and fundamental support for prices is marginally weakening. Before the holiday, the secondary aluminium alloy price is expected to fluctuate at highs in the doldrums, with the price centre pulling back slightly.

Aluminium market summary: On the macro front, the domestic Ministry of Commerce is promoting the expansion and quality improvement of automotive consumption, particularly by clarifying optimisation of the trade-in policy, providing medium and long-term demand expectations to support the aluminium price floor. However, fundamentals are facing typical seasonal weakening pressures. On the 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. On the demand side, the market has entered the pre-Chinese New Year off-season, as downstream processing enterprises gradually begin holidays, leading to a decline in operating rates and noticeably weaker consumption from the production side. The current aluminium ingot inventory buildup has accelerated, and the market expects post-holiday inventory peaks to reach multi-year highs. Visible inventory pressure is gradually becoming a key real factor suppressing aluminium prices. In summary, under the influence of earlier macro headwinds, substantial capital took profits and exited, leading to a pullback in aluminium prices and a reduction in open interest. However, as precious metals did not show further downward momentum, aluminium prices stabilised accordingly. In the short term, aluminium prices are expected to consolidate.

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.