US Fed Rate Hike Lands, Accelerated Aluminum Ingot Destocking Expected to Support Aluminum Prices [SMM Aluminum Price Weekly Review]

SMM, September 17:

Macro perspective:

Outside China, the US Fed raised interest rates by 25 basis points to 3.75%-4.00% as expected, the first hike since July 2023, with a unanimous FOMC vote. The dot plot showed one more possible rate hike in 2026, extending the period of high interest rates. As a result, US Treasuries saw heavy selling, the US dollar and real yields rose, directly weighing on the valuation of dollar-denominated nonferrous metals. Geopolitically, tensions in the Strait of Hormuz persisted, with Iran claiming the strait was under its "smart control," and a regional shipping security meeting originally scheduled in Oman was forced to be postponed, raising energy transport and risk premiums. Overall, macro sentiment was mixed.

Fundamentals:

Supply side, this week, China's weekly aluminum production remained stable, while some downstream sectors saw certain production cuts, reducing liquid aluminum purchases and lowering the proportion of liquid aluminum by 0.02 percentage points. Outside China, according to foreign media reports, Alba's operating capacity recovered to around 1.3 million mt, further lifting ex-China operating capacity. Demand side, with the upcoming holiday, downstream stockpiling sentiment improved slightly. Inventory side, aluminum ingot shipments from Xinjiang were disrupted, and combined with downstream stockpiling, aluminum ingot destocking expanded this week. As of Thursday this week, China's aluminum ingot social inventory fell by 63,000 mt WoW and by 43,000 mt from Monday; aluminum billet inventory edged lower mid-week, down 500 mt WoW. In the short term, the aluminum destocking trend is expected to continue. Attention should be paid to operating rates in certain sectors.

In summary, with the US Fed's first rate hike implemented and the Middle East situation unresolved, macro sentiment remains highly uncertain. On fundamentals, production resumptions in the Middle East continued to accelerate, but some new projects were delayed, and the pace of operating capacity increases is expected to slow in the coming months; the upcoming holiday and downstream stockpiling demand support destocking. The most-traded SHFE aluminum contract is expected to trade at 23,800-24,500 yuan/mt next week; LME aluminum is expected to trade at $3,200-3,350/mt. Close attention should be paid to downstream operating trends in China.

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