The Fundamentals of the Aluminum Market Lack Driving Force, and the Upside Potential for Aluminum Prices Is Limited [SMM Aluminum Price Weekly Review]

On the macro front, the US Fed cut interest rates by 25 basis points at its October meeting and announced it would end balance sheet reduction in December, with two committee members dissenting from the rate decision. However, Fed Chair Powell expressed caution regarding further easing in December, leading to a slight weakening in LME aluminum prices towards the session's close. Market participants are watching the China-US talks for further macro signals, with sentiment leaning optimistic ahead of the meeting.

Supply side, domestic operating aluminum capacity saw limited change. Overseas, an aluminum smelter cut production by 210,000 mt and is expected to implement further cuts in March 2026, reigniting concerns about tight supply. Medium-term focus remains on the ramp-up of aluminum projects in Indonesia.

Demand side, aluminum prices fluctuated at highs, coupled with severe smog in central China triggering environmental protection-driven production restriction policies, which somewhat dampened demand. Additionally, high LME aluminum prices closed the processing trade window, weakening demand for aluminum semis exports. Attention is on the destocking cycle for finished products at downstream processors amid high aluminum prices.

Inventory side, inventories fluctuated rangebound. According to SMM statistics, as of October 30, Chinese aluminum social inventory stood at 619,000 mt, down 7,000 mt WoW from Monday. With growing in-transit inventories and demand suppressed by environmental protection-driven production restrictions, inventory buildup is expected to resume.

Overall, with aluminum prices currently high, downstream processing enterprises prioritized destocking finished product inventories, leading to weaker demand for raw materials. However, aluminum ingot inventories remain relatively low, providing limited fundamental drive for aluminum prices in the short term. Amid still relatively optimistic macro sentiment both domestically and overseas, the most-traded SHFE aluminum contract is expected to find support at 20,800 yuan/mt. In the absence of clear fundamental drivers, resistance is anticipated near 21,500 yuan/mt. Next week, the most-traded SHFE aluminum contract is forecast to trade between 20,900-21,400 yuan/mt, while LME aluminum is expected to trade between $2,820-2,930/mt.