Accelerated destocking of aluminum ingots during the peak season supports aluminum prices to hold up well in the short term [SMM Aluminum Morning Meeting Summary]

9.3 SMM Aluminum Morning Meeting Minutes

Futures: Yesterday, SHFE aluminum closed at 24,235 yuan/mt, up 0.75%, hitting a new recent high of 24,290 during the session. The price is well above all key moving averages (MA5=24,080, MA10=23,925, MA30=23,820, MA60=23,572), with the moving average system in a bullish divergence and a strong medium-term uptrend intact. The MACD indicator shows DIF=120.51 and DEA=97.52, with the histogram expanding to 45.99, indicating sustained strengthening of bullish momentum. Trading volume expanded to 91,100 lots, with market participation rebounding notably. The suggested core trading range for SHFE aluminum is 24,000-24,600. LME aluminum closed at $3,288.5/mt, down slightly by 0.18%, with intraday fluctuations around 3,271.5-3,290. The price is above all key moving averages (MA5=3,244.3, MA10=3,243.55, MA30=3,237.1, MA60=3,230.63), with the moving average system in a bullish alignment. The MACD indicator shows DIF=9.64 and DEA=4.52, with the histogram expanding to 10.24, indicating sustained strengthening of bullish momentum. The suggested core trading range for LME aluminum is 3,250-3,320.

Macro front: US President Trump said the new round of strikes against Iran will not last long; he is prepared to launch another attack on Iran. Iranian Parliament Speaker Qalibaf said the US must fulfill its relevant commitments before Iran will take action to reopen the Strait of Hormuz.

The US Fed's Beige Book showed that US economic activity grew mildly since early July. Of the 12 Fed districts, 10 reported slight to moderate growth, while 2 reported no change. Enterprises generally expect a positive economic outlook ahead, but remain attentive to uncertainties arising from energy prices, policies, and international conflicts.

Fundamentals: In markets outside China, overseas aluminum production resumptions and new capacity continued to ramp up as planned, and damaged capacity in the Middle East is gradually recovering. Market expectations persist that the global aluminum market will shift from tight to loose in the longer term, continuing to cap the upside room for aluminum prices. However, LME visible inventory remains at a historically low level of around 250,000 mt, providing bottom support for LME aluminum. In the Chinese market, on the inventory side, China's aluminum social inventory continued its destocking trend this week. As of this Thursday, China's aluminum ingot social inventory fell by 22,000 mt WoW to 815,000 mt, and was down 37,000 mt from last Thursday, providing strong support for aluminum prices.

Primary aluminum market: SHFE aluminum futures fluctuated more sharply today than at the same time yesterday, but the price center was basically flat. Bullish sentiment persists in the spot market, with spot premiums for A00 aluminum ingot continuing to rise and trading activity moderate. Morning deals were mainly done at parity to a premium of 20 yuan/mt. Trading sentiment in the central China market remained sluggish today, but improved slightly WoW. September orders at downstream processing enterprises rebounded somewhat, lifting raw material purchasing sentiment modestly. Suppliers grew increasingly inclined to hold prices firm, and market quotes stopped trending lower. Ultimately, actual transaction prices in the central China market centered around a discount of 110-130 yuan/mt against the SHFE aluminum 09 contract. Aluminum prices edged up today, and the spot market staged a sharp rebound. Inventory continued to destock and remained at low levels. In early trading, most suppliers still leaned bearish on the outlook and actively lowered quotes to secure cash first, with some even resorting to sell-offs. However, north-to-south arrivals lacked scale in the short term, traders showed intent to restock and gradually absorbed discounted cargoes, and downstream users had rigid buying demand. Spot circulation tightened quickly, and key large buyers once again raised prices aggressively to purchase, generating a notable ripple effect. Suppliers subsequently returned to holding prices firm and holding back from selling, with quotes gradually raised and actual transactions at even higher levels. Overall transactions were satisfactory.

Aluminum scrap: Today, SMM A00 spot aluminum closed at 24,080 yuan/mt, down 30 yuan/mt from the previous trading day. Domestic aluminum scrap prices were broadly stable. On the price spread front, as of September 2, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan stood at about 2,322 yuan/mt, while the price difference between A00 aluminum and shredded aluminum tense scrap stood at about 1,157 yuan/mt, both stable WoW. With primary aluminum prices continuing to rebound, aluminum scrap fluctuations remained relatively limited, and the price transmission mechanism was hindered, mainly constrained by two factors: first, the traditional peak season is about to arrive, but downstream secondary aluminum alloy demand has yet to show clear improvement; second, inventory of wrought aluminum alloy scrap such as doors and windows in Henan and other regions remains high, weakening the upside elasticity of aluminum scrap prices. In addition, the "reverse invoicing" policy constraint on the supply side persists, and the scarcity of compliant invoiced aluminum scrap provides bottom support for aluminum scrap prices. In the short term, the market is at the tail end of the traditional off-season, and orders at downstream scrap utilization enterprises have yet to show a clear recovery. The front-loading effect of the peak season is not significant, and scrap utilization enterprises continue to purchase as needed and maintain low inventory strategies, showing limited acceptance of higher prices. Some enterprises opted to hold off and observe after earlier price-following moves. On the import side, previously traded cargoes have been arriving at ports, providing some supply replenishment, but the deeper effects of the UAE ban and EU tariff hikes will continue to limit the volume of premium scrap imports.

Secondary aluminum alloy: Spot market: ADC12 market quotes remained broadly stable today. On one hand, aluminum prices and futures have been relatively steady, with no notable changes on the cost side, providing little further impetus for spot prices. On the other hand, while end-use demand has improved slightly from earlier levels, the peak season has yet to clearly kick in, and the sustainability of the improvement in market purchasing remains to be seen. Against this backdrop, most enterprises are temporarily holding prices steady and taking a wait-and-see approach. Some enterprises hold a cautiously optimistic attitude toward the market outlook, but no widespread price hike actions have yet formed. Short-term prices are expected to continue to consolidate on a strong note, with focus on subsequent aluminum price trends and the release of end-use demand.

Comprehensive Outlook:On the macro front, the Jackson Hole central bank symposium sent hawkish signals, and Fed Chairman Warsh's debut remarks leaned hawkish. Expectations for a September rate hike have heated up again, and global liquidity expectations have tightened, weighing on macro sentiment and exerting bearish pressure on aluminum prices. However, China's continued destocking and the ongoing "September peak season" are providing strong support below aluminum prices. With bullish and bearish factors intertwined, aluminum prices are expected to continue to consolidate at highs.

[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions prudently and should not use this as a substitute for independent judgment. Any decisions made by clients are not related to SMM.]