Ex-China Capacity Gradually Recovers; China Destocking Expansion Supports Aluminum Price Bottom [SMM Aluminum Morning Meeting Summary]

9.18 SMM Aluminum Morning Meeting Minutes

Futures: The most-traded SHFE aluminum 2611 contract closed at 24,400 yuan/mt, up 180 yuan from the previous day’s settlement, a gain of 0.74%. It opened at 24,260.00 yuan/mt and fluctuated within 24,260–24,440 yuan/mt. Prices traded above the MA5 (24,187.00), MA10 (24,307.00), MA30 (24,082.50), and MA60 (23,656.58) moving averages. The short-term rebound pattern continued, a drift-higher structure emerged, and the MA10 formed short-term resistance. The MACD indicator showed DIF (127.4248) below DEA (142.2962), with the MACD green histogram at -29.7429, indicating that bearish momentum narrowed somewhat. The suggested core trading range for SHFE aluminum was 23,900–24,600 yuan/mt. The LME aluminum 3M contract closed at $3,293.50/mt, up 0.11%. It opened at $3,294.50/mt and fluctuated within $3,287.50–$3,299.00/mt. Prices traded above the MA5 (3,272.70), MA30 (3,271.35), and MA60 (3,218.11) moving averages, and above the MA10 (3,290.10). The consolidation-repair structure continued, with short-term moving averages providing support. The MACD indicator showed DIF (10.2079) below DEA (12.0771), with the MACD green histogram at -3.7384, indicating that bearish momentum narrowed somewhat, and prices consolidated at highs. The suggested core trading range for LME aluminum was $3,200–$3,350/mt.

Macro front: The Bank of England kept its benchmark interest rate unchanged at 3.75%, marking the sixth consecutive hold, in line with market expectations. The BoE warned that if Middle East conflicts intensified inflationary pressures, it might need to raise rates. Meanwhile, the BoE abandoned its plan to sell long-dated government bonds and said it would complete the reduction of its £488 billion debt-asset portfolio by September 2034. Sources said President Trump was expected to meet with Gulf state leaders next Tuesday on the sidelines of the UN General Assembly in New York to discuss follow-up arrangements for the war with Iran. The meeting was expected to focus on the post-war strategic framework proposed by the US.

Fundamentals: Supply side, China’s weekly aluminum production remained steady this week. Some downstream sectors saw certain production cuts, purchases of liquid aluminum decreased, and the proportion of liquid aluminum edged down by 0.02 percentage points. Outside China, according to foreign media reports, Aluminum Bahrain’s operating capacity recovered to around 1.3 million mt, further lifting operating capacity outside China. Demand side, with the short holiday approaching, downstream stocking sentiment rose slightly. Inventory side, aluminum ingot shipments from Xinjiang were hindered; coupled with downstream stocking, the pace of aluminum ingot destocking expanded this week. As of this Thursday, China’s social inventory of aluminum ingot fell by 63,000 mt from last Thursday and by 43,000 mt from this Monday; aluminum billet inventory dipped slightly mid-week, down 500 mt from last Thursday. In the short term, aluminum destocking is expected to continue.

Primary aluminum market: The SHFE aluminum 2610 contract futures center fluctuated relatively little from yesterday, with SHFE aluminum showing signs of stabilization. As the holiday approaches, downstream stocking willingness has increased. Recent warehouse withdrawal data in east China has been strong, and spot premiums in east China remain firm. SMM A00 aluminum ingot transactions closed at premiums of 10-30 yuan/mt. Macro disturbances combined with destocking speed have disrupted SHFE aluminum futures, also keeping supplier quotes in the central China market at relatively high levels. However, constrained by low purchase willingness among downstream processing enterprises and weak actual transactions, quote levels continued to decline. Ultimately, actual transaction prices in the central China market were centered around discounts of 30-60 yuan/mt against the SHFE aluminum 10 contract. SMM daily inventory data for aluminum ingots across the three regions showed destocking of 26,000 mt, with all three regions posting declines.

South China market: On Thursday, aluminum prices edged up for the third consecutive day, with the spot market tug-of-war remaining prominent. On the supply side, tight arrivals and a sharp pullback in inventory supported suppliers' firm pricing stance, with actual spot cargo circulation remaining tight. On the other hand, the steady rise in absolute prices combined with elevated spot-futures price spread expectations also boosted suppliers' willingness to cash in, revealing divergences in the market. Overall, the firm pricing camp held the upper hand. On the demand side, downstream buyers steadily purchased on price gains and carried out some holiday stockpiling in advance, providing a floor for the market. However, traders were generally wary of high prices and cautious in purchasing, with only a few large players actively raising prices to buy and make markets, leaving transactions lukewarm. Spot transaction prices were concentrated at premiums of 215-255 yuan/mt against the SHFE aluminum 2609 contract.

Aluminum scrap: On Thursday, SMM A00 aluminum closed at 24,180 yuan/mt, up 20 yuan/mt WoW from the previous trading day, while the aluminum scrap market was broadly flat. In terms of price differences between A00 aluminum and aluminum scrap, on September 17, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,468 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 1,247 yuan/mt. The price difference between A00 aluminum and aluminum tense scrap narrowed again WoW. On the supply side, the tight raw material supply pattern remains unchanged, and the scarcity of compliant, invoiced aluminum scrap continues to rise. Notably, tax inspections in central China continue to escalate, and the sharp drop in regional aluminum scrap supply will clearly disrupt aluminum scrap circulation. On the import side, this week, imported shredded aluminum prices at Ningbo port were raised from 21,370 yuan/mt to 21,470 yuan/mt (tax inclusive), while at Tianjin port they rose from 21,420 yuan/mt to 21,520 yuan/mt (tax inclusive). On the demand side, the cast aluminum alloy September peak season has been lackluster, with demand yet to see a substantial increase. End-user orders have only improved slightly from the off-season, without concentrated restocking. Demand for wrought aluminum alloy is moderate, and in-factory aluminum scrap inventory is relatively ample. The aluminum scrap market is expected to continue consolidating on a strong note. Supply side, the impact of tax audits continues to spread. If aluminum scrap yards slow down shipments, circulating supply will tighten again, and aluminum scrap prices are expected to find strong support at the bottom. Going forward, we will continue to closely monitor the chain reactions of tax audits on the aluminum scrap industry chain and changes in orders at scrap utilization enterprises.

Secondary aluminum alloy:Spot side: On Thursday, the ADC12 market broadly showed price increases and stronger cost support. SMM ADC12 price rose 100 yuan/mt from the previous trading day to 24,350 yuan/mt. Cost side, procurement of aluminum scrap raw materials remained difficult, and prices stayed high. Coupled with increasingly strict invoice supervision recently, reverse invoicing operations were suspended in some regions, further increasing enterprises' reliance on compliant, invoiced supply. However, supply of such material was limited and procurement prices were high, leading to persistently rising overall raw material cost pressure. Currently, the upward momentum in ADC12 prices is mainly driven by higher compliant raw material costs, and enterprises are clearly more willing to raise quotes. However, the actual improvement in end-use demand remains to be seen. The sustainability and extent of subsequent price increases will still depend on the strength of cost support, implementation of invoice policies, and downstream purchasing capacity.

Overall outlook:The US Fed's first rate hike has landed, and the situation in the Middle East remains unsettled, leaving macro sentiment highly uncertain. Fundamentals side, production resumptions in the Middle East continue to accelerate, but some new projects have been delayed, and the pace of operating capacity increases is expected to slow in the coming months. With the short holiday approaching, downstream stockpiling demand is supporting destocking. Short-term aluminum prices are expected to consolidate at highs.

[The information provided is for reference only. This document does not constitute direct investment research or decision-making advice. 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.]