SHFE aluminium night session breaks through 25,000, aluminium prices maintain high levels

Futures: During the night session on January 12, the SHFE aluminium 2603 contract showed a pattern of retreating after a rapid rise and consolidating at high levels. It opened the night session at RMB 24,750 per tonne, hit a high of RMB 25,075 per tonne, touched a low of RMB 24,280 per tonne, and closed at RMB 24,630 per tonne, down 0.08 per cent.

Trading volume was 510,000 lots, an increase of 126,000 lots, while open interest stood at 383,000 lots, up 4,112 lots. Technical analysis shows the MA system is in a bullish alignment (MA5: 24,368 > MA10: 23,813 > MA20: 22,993.75 > MA60: 22,088.17), with the medium and long-term uptrend remaining intact. LME aluminium opened at USD 3,154.5 per tonne, reached a high of USD 3,200 per tonne, touched a low of USD 3,143 per tonne, and finally closed at USD 3,191 per tonne, up 1.33 per cent. Trading volume was 36,000 lots, and open interest was 688,000 lots.

Macro mront: On the afternoon of January 12, US President Trump posted on social media that any country engaging in commercial dealings with Iran would face a 25 per cent tariff on all its commercial dealings with the US, effective immediately. (Neutral) On January 12, the Ministry of Commerce provided an update on the consultations regarding the EU-China EV case: The EU side will issue the "Guidance Document on Submitting Price Undertaking Applications." The European Commission has committed to conducting an objective and impartial review of applications submitted by Chinese enterprises based on uniform standards and the principle of non-discrimination. Eligible enterprises may use price undertakings as an alternative to countervailing duties. (Neutral)

Fundamentals: Inventory side, according to SMM statistics, on January 12, aluminium ingot inventories across three domestic locations saw a buildup of 16,500 tonne, with Wuxi region inventories increasing by 10,500 tonne; while aluminium billet inventories in two locations accumulated 11,000 tonne, with Guangdong region inventories rising by 9,000 tonne.

Primary aluminium market: During Monday's early session, the SHFE aluminium 2601 contract fluctuated upward, but the price centre was higher compared to the previous trading day. High aluminium prices suppressed downstream purchase demand, leading to an overall decline in trading sentiment w-o-w. Mainstream transaction prices were mainly in the range from a discount of RMB 30 per tonne against the SMM average price to the average price. Yesterday, the East China market selling sentiment index was 2.64, down 0.07 w-o-w; the purchasing sentiment index was 2.74, down 0.08 w-o-w. The SMM A00 aluminium offer was RMB 24,340 per tonne, up RMB 310 per tonne from the previous trading day, at a discount of RMB 100 per tonne against the 2601 contract, unchanged from the previous day. On Monday, the absolute aluminium price rose, and with accumulated premiums and discounts being high recently, purchasers significantly decreased. However, selling sentiment in the central China market increased, with major holders showing a stronger willingness to sell. Market supply circulation eased, and the willingness to hold prices firm gradually weakened.

Eventually, actual transaction prices in the central China market fell from a premium of RMB 30 per tonne against the central China price before the opening to a range between a discount of RMB 10 per tonne against the central China price. Yesterday, the sales sentiment index in the central China market was 2.58, up 0.11 m-o-m; the purchasing sentiment index was 1.40, up 0.73 m-o-m. The SMM aluminium price in central China closed at RMB 24,180 per tonne, up RMB 320 per tonne from the previous trading day, at a discount of RMB 260 per tonne against the 2601 contract, up RMB 10 per tonne from the previous trading day; the Henan-Shanghai price spread was -RMB 160 per tonne, up RMB 10 per tonne from the previous trading day.

Recycled aluminium raw materials: On Monday, spot primary aluminium prices rose compared to the previous trading day, with SMM A00 spot closing at RMB 24,340 per tonne, and aluminium scrap market prices generally followed the increase. Supply side, environmental protection-driven production restrictions in the central China region were lifted, but inventory levels of wrought aluminium alloy scrap remained saturated. Demand side, the "nominal price without actual transactions" characteristic became prominent, downstream resistance to high prices was strong, with mostly purchasing as needed or digesting inventories, some enterprises planned early production halts, and Chinese New Year stockpiling expectations weakened. Yesterday, baled UBC aluminium scrap was mainly quoted at RMB 17,900-18,300 per tonne (tax excluded), and shredded aluminium tensile scrap (priced based on aluminium content) was mainly quoted at RMB 19,450-19,950 per tonne (tax excluded).

Regarding the price difference between A00 aluminium and aluminium scrap, on January 12, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was RMB 4,121 per tonne, and the price difference between A00 aluminium and shredded aluminium tensile scrap was RMB 2,944 per tonne. The aluminium scrap market is expected to hover at highs this week, with shredded aluminium tensile scrap (priced based on aluminium content) mainstream range at RMB 18,800-19,200 per tonne (tax excluded). High primary aluminium prices will provide bottom support for aluminium scrap, but poor cost transmission along the industry chain will limit upside room. Inventory pressure on the supply side and the fragmented scrap source pattern are difficult to change in the short term.

The suppressing effect on the demand side intensifies as the Chinese New Year approaches, enterprises gradually enter holiday cycles, the operating rate of secondary aluminium producers will further decline, the scope of downstream production cuts and halts will expand, and stocking demand is unlikely to form effective support. Overall, the tug-of-war between sellers and buyers continues; close tracking of primary aluminium trends, downstream shutdown progress, and pre-holiday transaction conditions is needed, while being cautious of high price correction risks.

Secondary aluminium alloy: Futures side, the aluminium alloy 2603 contract opened at RMB 22,985 per tonne yesterday, fluctuating at highs overall, touched an intraday high of RMB 23,450 per tonne, a low of RMB 22,945 per tonne, and finally closed at RMB 23,340 per tonne, up RMB 355 per tonne or 1.54 per cent from the previous close. Bulls mainly increased positions. Spot market, aluminium prices performed strongly on Monday, with A00 price rising RMB 310 per tonne in a single day to RMB 24,340 per tonne, breaking the historical high of RMB 24,240 per tonne in 2021.

SMM ADC12 price followed up RMB 250 per tonne, quoted at RMB 23,950 per tonne. The secondary aluminium market showed clear follow-up sentiment; mainstream quotations were generally raised by RMB 200-300 per tonne, but the market exhibited a "nominal price without actual transactions" characteristic; actual transactions were mainly rigid demand, downstream acceptance of high prices was limited, and wait-and-see sentiment was strong. From the perspective of market drivers, cost support and a tight supply-demand pattern provide a bottom for aluminium prices, but weak demand is constraining price increases. Overall, with the boost from short-term macro tailwinds, ADC12 prices are expected to hover at highs. Currently, bullish and bearish factors are intertwined in the market, requiring close attention to changes in the supply-demand pattern and macro policy direction.

Aluminium market summary: Recently, the macro front remains strong; expectations for US Fed interest rate cuts continue to drive the logic of a monetary easing cycle, supporting nonferrous metal prices and creating a catch-up rally. The dual catalysts of monetary easing and new consumption policies are boosting risk appetite in the commodity market and solidifying demand expectations, resonating with overseas factors to further consolidate the foundation for aluminium price gains.

In the domestic market, the National Taxation Administration's announcement last Friday of the cancellation of export tax rebates for PV may trigger a rush to meet deadlines, leading to a short-term phased increase in consumption. Currently, the reality of pressured fundamental consumption and accumulating social inventory is somewhat suppressing sustained aluminium price rises. However, strong macro policy expectations and geopolitical risk disturbances, with sentiment and capital flows still dominant, continue to provide support for aluminium prices. Aluminium prices are expected to mainly fluctuate at highs.

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.