SMM, September 24:
1. Macro perspective
The US-Iran conflict entered its second week. After the escort coalition intervened, traffic through the Strait of Hormuz partially recovered, but war risk insurance rates remained elevated. Brent crude pulled back from a high of $101 to consolidate around $95, with energy cost support weakening from earlier levels but not yet fading. The US Fed delivered a 25bp rate hike at its September FOMC meeting, and the dot plot indicated one more hike may still occur this year. Chair Warsh struck a hawkish tone in his post-meeting remarks, and the US dollar index held at a 13-month high. Next week, attention turns to China's official PMI on September 30, as well as US PCE and non-farm payrolls data during the National Day holiday—with China's market closed for seven days while the LME trades continuously, there is gap risk after the holiday from accumulated moves on the LME, and safe-haven demand in the capital market is rising.
2. Fundamentals
Outside China, aluminum production resumptions continued to advance, and expectations of ample supply in the longer term persisted. However, LME aluminum inventory stood at only 241,000 mt, remaining at historically extreme lows, and the global visible inventory destocking trend remained intact. In China, demand during the "September peak season" showed overall recovery, and with Xinjiang shipments disrupted and downstream restocking ahead of the holiday, social inventory continued to destock. According to SMM statistics, China's aluminum ingot social inventory stood at 678,000 mt on September 24, down sharply by 55,000 mt WoW from last Thursday. However, marginal changes warrant caution: the proportion of liquid aluminum declined this week, and casting ingot volumes at aluminum smelters increased MoM, signaling marginal supply expansion on the ingot side. The main reason is that aluminum billet processing fees remained persistently low, prompting billet enterprises in some regions to cut production proactively, which in turn reduced demand for direct liquid aluminum supply and diverted more liquid aluminum into casting ingots.
3. Overall assessment
On the macro front, the US Fed's hawkish rate-hike cycle has restarted, with a strong US dollar and elevated US Treasury yields continuing to weigh on nonferrous metal valuations. On the fundamentals side, while China's inventory remains low and destocking continues, rising casting ingot volumes combined with aluminum billet production cuts have weakened liquid aluminum demand, and position adjustments ahead of the National Day holiday have intensified the tug-of-war between longs and shorts. Aluminum prices are expected to consolidate next week, with the most-traded SHFE aluminum contract trading in the range of 23,800-24,300 yuan/mt and LME aluminum at $3,150-3,250/mt. Caution is needed regarding inventory risks from concentrated arrivals of aluminum ingots after the National Day holiday, as seasonal inventory buildup and the easing of Xinjiang shipment disruptions could materialize.
[The information provided is for reference only. This article 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 Shanghai Metals Market.]
![China primary aluminum alloy industry leaders' operating rate recorded at 60%, production pace expected to remain stable during the holiday [SMM Analysis]](https://imgqn.smm.cn/usercenter/XfCZS20251217171655.jpg)
