Macro headwinds combined with divergent domestic demand in China keep aluminum prices consolidating [SMM Aluminum Morning Meeting Summary]

9.29 SMM Aluminum Morning Meeting Minutes

Futures: The most-traded SHFE aluminum contract opened at 24,000 yuan/mt in the night session on September 28, reached a high of 24,055 yuan/mt and a low of 23,950 yuan/mt, and closed at 24,000 yuan/mt, up 50 yuan/mt or 0.21% from the previous close. Futures stabilized after a sharp decline, with prices falling below the 5/10/20/40/60 moving averages across all timeframes, turning these averages from support into resistance. Trading volume during the session was 53,872 lots, with open interest at 271,000 lots, down 3,240 lots, driven mainly by bear position reductions. On the technical front, the 4-hour MACD death cross continued, with DIFF trading well below DEA and green bars expanding significantly, indicating strong short-term bearish momentum. On September 28, LME aluminum 3M opened at $3,275.0/mt, reached a high of $3,275.0/mt and a low of $3,222.5/mt, and closed at $3,248.0/mt, down $29.5/mt or 0.90% from the previous close. Futures retreated after a rapid rise to close lower, with moving averages across all timeframes intertwined, and prices pulled back below the short-term moving averages, maintaining a sideways consolidation pattern. Open interest for the day was 575,000 lots, down 2,090 lots, driven mainly by bull position liquidation. On the technical front, the daily MACD maintained a death cross, with DIFF trading below DEA and green bars expanding again, indicating strengthening bearish momentum.

Macro front: According to CME "Fed Watch": The probability of the Fed keeping rates unchanged at 3.75%-4.00% at the October meeting is 29.1%, while the probability of a 25bp hike is 70.9%. The probability of the Fed keeping rates unchanged at 3.75%-4.00% by December is 5.0%, with a 36.3% probability of a cumulative 25bp hike and a 58.7% probability of a cumulative 50bp hike. Fed Governor Lisa Cook said US inflation will continue to face pressure in the coming months, mainly from AI-related demand growth, rising oil prices, and supply chain disruptions caused by Middle East conflicts, but she did not explicitly indicate that further rate hikes are needed. Cook said the labour market is currently "capable of withstanding higher interest rates," and the magnitude and frequency of future monetary policy adjustments will depend on how the economy responds to policy actions, as well as inflation and employment data in the coming months.

Fundamentals: The core contradiction in the overseas US dollar aluminum market recently remains supply-side pressure and weak demand. In the short term, Southeast Asian market quotes are unlikely to strengthen, and the price divergence pattern in the South Korean market may persist; the Japanese market needs to watch the pace of downstream restocking after the holiday; the US market is expected to continue operating steadily. During the 2026 National Day and Mid-Autumn Festival holidays, China's aluminum processing sectors overall maintained relatively high production continuity, with holiday factors having relatively limited impact on supply-side disruptions, but there were clear divergences in operations across sectors and enterprises. Overall, during the double holidays, the supply side of the aluminum processing industry remained resilient, with phased production cuts in some areas. Pre-holiday downstream stockpiling provided some support to demand. After the holidays, focus should be on the pace of production resumptions at enterprises, improvement in downstream orders, and the further impact of aluminum price trends on peak-season demand.

Primary aluminum market: Spot prices against the SHFE aluminum 2610 contract were at a premium of 30-40 yuan/mt, with cargoes with invoices dated next month concentrated. On Monday, suppliers reported strong transactions, with downstream purchases relatively active. However, upstream reduced shipments due to falling aluminum prices. SMM A00 aluminum ingot spot transactions were at a premium of 30-50 yuan/mt against the SHFE aluminum 2610 contract. On the first trading day after the Mid-Autumn Festival, downstream processing enterprises in central China showed low stockpiling sentiment, and National Day holiday stockpiling had largely ended. Although SHFE aluminum futures fell further, overall market trading sentiment remained sluggish. Suppliers tended to sell quickly to clear inventory, with weak willingness to hold prices firm, and transaction prices continued to decline. Ultimately, the actual transaction price range in central China was around a discount of 20-70 yuan/mt against the SHFE aluminum October contract. Inventory trends in the three regions continued to diverge, with Guangdong destocking by 1,000 mt, Wuxi destocking by 1,000 mt, and central China seeing an inventory buildup of 2,000 mt.

South China market: On Monday, aluminum prices edged down, and the spot market remained weak. After the short holiday, inventory did not accumulate, and absolute prices were weak. In early trading, suppliers generally tried to hold prices firm and were in no rush to sell, but with spot-futures price spread expectations already at high levels and the National Day holiday approaching, the need to sell for cash became stronger. Quotes gradually shifted lower, with ample supply of discounted cargoes. On the demand side, buyers were somewhat bearish and cautious, with limited restocking demand. Combined with caution on spot-futures price spread trends and more selling than buying, transactions were less than ideal.

Aluminum scrap: On Monday, SMM A00 aluminum closed at 24,170 yuan/mt, down 70 yuan/mt WoW from the previous trading day, while the aluminum scrap market overall fell by 100 yuan/mt. In terms of price differences, on September 24, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,533 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 1,312 yuan/mt. On the import side, August aluminum scrap imports recovered MoM, mainly due to the resumption of shipping schedules and replenishment from Southeast Asian sources. In terms of supply, tax inspections in Henan, Hunan, and other regions continued to deepen, with compliant invoiced aluminum scrap becoming increasingly scarce and prices strongly supported. Meanwhile, non-invoiced cargoes faced narrowing sales channels under compliance pressure, with some traders forced to cut prices to sell, keeping prices under downward pressure. On the demand side, the "September peak season" for cast aluminum alloy was less robust than expected, with demand yet to see substantial growth. Demand for wrought aluminum alloy was moderate, and in-factory aluminum scrap inventory was relatively ample. The secondary aluminum scrap market is expected to continue consolidating on a strong note this week, with mainstream shredded aluminum tense scrap (priced based on aluminum content) likely to trade around 20,500-21,200 yuan/mt. Focus should be on the expanding scope of tax inspections and downstream stocking ahead of the National Day holiday.

Secondary aluminum alloy:Spot: On Monday, ADC12 market quotes overall remained stable, with enterprises showing generally weak willingness to adjust prices. SMM ADC12 price held steady at 24,500 yuan/mt from the previous trading day. Cost side, although aluminum prices and futures weakened, the adjustment in aluminum scrap raw material prices was limited. Coupled with stricter enforcement of tax invoice policies recently, compliant raw material procurement costs for some enterprises remained at relatively high levels, with the cost side providing strong support for spot prices. Demand side, with the National Day holiday approaching, downstream pre-holiday stockpiling was relatively mediocre, with market transactions lacking notable growth, and the demand side providing limited upward momentum for prices. Overall, enterprise quotes are expected to remain stable before the holiday, with subsequent trends requiring close attention to actual transactions and raw material cost changes.

Comprehensive outlook:Macro front, the US Fed's hawkish rate hike cycle restart, a strong US dollar, and high US Treasury yields continued to weigh on nonferrous metals valuations. Fundamentals, China's inventory remained low with destocking continuing, but rising casting ingot volumes combined with aluminum billet production cuts led to weaker liquid aluminum demand. Coupled with open interest adjustment pressure ahead of the National Day long holiday, the tug-of-war between longs and shorts intensified, with aluminum prices expected to consolidate mainly.

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