SMM Oct 8 Aluminum Morning Meeting Minutes:
Futures: SHFE aluminum was not open during the National Day holiday. On Oct 7, LME aluminum 3M opened at $3,140.5/mt, hit a high of $3,148.0/mt, a low of $3,101.5/mt, and closed at $3,125.0/mt, down $18.5/mt from the previous close, a decline of 0.59%. Futures continued to consolidate on a weak note, with prices breaking below the 5/10/20/40/60-period moving averages. All moving averages exerted downward pressure, confirming a clear bearish trend. Trading volume during the session was 16,383 lots, with open interest at 567,000 lots, up 1,296 lots, driven mainly by bearish positioning. On the daily chart, the MACD death cross persisted, with DIFF below DEA and green bars maintained, indicating bearish momentum was still being released.
Macro front: US nonfarm payrolls rose by only 29,000 in September, far below expectations, rapidly cooling market bets on a Fed rate hike in October. However, escalating geopolitical conflicts in the Middle East pushed Brent crude back above $100, while a surge in AI-related bond issuance kept US Treasury yields climbing, casting a lingering shadow of "stagflation." According to CME "FedWatch": the probability of the Fed keeping rates unchanged through October was 80.6%, with a 19.4% chance of a cumulative 25 bp hike. The probability of the Fed keeping rates unchanged through December was 21.7%, with a 64.1% chance of a cumulative 25 bp hike and a 14.2% chance of a cumulative 50 bp hike. The US ISM services PMI fell to 54.9 in September, but the prices index jumped to 74.0, a four-year high, indicating slowing services expansion alongside rebounding cost pressure. The US Labor Department's employment report released last Friday showed nonfarm payrolls increased by 29,000 in September, while August payrolls were revised down to an increase of 133,000.
Fundamentals: In September, China's downstream demand recovered somewhat MoM, but processing fees for some processed products came under pressure, leading to production cuts or halts at some downstream enterprises. Purchase willingness for liquid aluminum subsequently weakened, dragging down the proportion of liquid aluminum output. The liquid aluminum share fell 0.5 percentage points MoM to 78.2%, below expectations at the start of the month, with the main reductions coming from parts of central China and south-west China. Based on SMM liquid aluminum proportion data, China's aluminum casting ingot output fell 6.2% YoY and 0.8% MoM in September. Entering October, affected by the National Day holiday, some downstream enterprises implemented temporary production cuts or halts, and the liquid aluminum proportion is expected to fall a further 0.3 percentage points to 77.9%. Processing fees for some downstream products still face downside risks, and liquid aluminum demand is under downward pressure. Casting ingot output during the holiday is likely to remain elevated MoM. Affected by centralized maintenance, production halts, and load reductions during the National Day holiday, the operating rate of leading aluminum downstream processing enterprises in China fell 1.6 percentage points WoW to 60.5% this week. On the inventory side, as of Thursday this week, domestic aluminum ingot social inventory built up by 48,000 mt compared with the Wednesday before the holiday.
Primary aluminum market: On September 30, the SHFE aluminum 2610 contract traded lower intraday compared with the same trading session the previous day, but as it was the last trading day before the holiday, market trading sentiment was sluggish. SMM A00 aluminum ingot spot premiums mainly traded at premiums of 30-50 yuan/mt. On the last working day before the National Day holiday, trading sentiment in the central China market was sluggish, with some traders already on holiday early, and market quotes significantly reduced compared with the previous two days. Some suppliers maintained high premium quotes, but actual transactions were limited, and sellers willing to actually move cargo showed little inclination to hold prices firm. Ultimately, actual transaction prices in the central China market centered around discounts of 40-70 yuan/mt against the SHFE aluminum October contract. South China market: On the last day before the holiday, aluminum prices continued to edge lower, and the spot market remained weak. The SHFE aluminum backwardation structure strengthened, with next-month and forward-month premiums actually elevated. Willingness to cash out before the holiday amid high spot-futures price spreads was strong, and quotes quickly shifted from holding firm to lowering prices to stimulate shipments, with mainstream levels in a range from small discounts to parity. Against the backdrop of strong destocking, discount-priced cargo remained plentiful. On the demand side, buying was largely dormant, with only sporadic bargain-hunting restocking, procurement demand nearly exiting the market, and transactions few and far between. Spot transaction prices concentrated at premiums of 240-280 yuan/mt against the SHFE aluminum 2610 contract.
Aluminum scrap: On September 30, SMM A00 aluminum closed at 24,030 yuan/mt, down 80 yuan/mt from the previous trading day, while the aluminum scrap market fell 0-100 yuan/mt, with some regions choosing to hold steady and wait and see before the holiday. On the price difference front, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,550 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 1,384 yuan/mt. On the import side, imported shredded aluminum prices at Ningbo Port and Tianjin Port were recorded at 21,470 yuan/mt and 21,520 yuan/mt respectively (tax inclusive). During the week, large downstream secondary aluminum enterprises mostly did not halt production over the National Day holiday, and pre-holiday stockpiling was completed at a normal pace. After the National Day holiday, the aluminum scrap market continued to hold up well. On the supply side, aluminum scrap yards will gradually resume operations after a brief 3-5 day holiday, and cargo release is expected to increase, but recycling policy constraints on circulation remain, the tight invoice supply situation is unlikely to ease in the short term, and tight supply will continue to support prices. On the demand side, as the traditional peak consumption season for cast aluminum alloy gradually kicks in, enterprises are accelerating order-taking and procurement pace, and aluminum tense scrap prices are expected to find even stronger support amid tight supply and demand. Demand for wrought aluminum alloy is moderate, and in-factory inventory is relatively ample, but with tax audit restrictions reducing expected aluminum scrap supply, the price uptrend is also set to gradually open up. However, judging from the current situation, the release of peak-season demand remains relatively mild, and the actual fulfillment of post-holiday orders still needs to be closely tracked.
Secondary aluminum alloy:On September 30, the last trading day before the National Day holiday, ADC12 market quotes remained generally stable. The SMM ADC12 price held steady at 24,500 yuan/mt from the previous trading day. On the raw material side, although aluminum prices pulled back somewhat during the week, aluminum scrap prices followed down only to a limited extent. In addition, after stricter enforcement of policies such as tax invoices, compliant raw material procurement costs for some enterprises remained at a relatively high level, providing a certain degree of cost-side support for ADC12 prices. On the demand side, downstream stockpiling before the holiday was generally cautious, with purchases still dominated by rigid demand. No clear concentrated restocking emerged, and demand-side momentum for price rises was also relatively limited. Under the combined effect of cost support and weak demand, the market showed a relatively pronounced wait-and-see pattern in the short term, with enterprises generally choosing to keep prices stable before the holiday. Going forward, close attention should be paid to changes in aluminum prices and aluminum scrap prices during the holiday, the pace of post-holiday production resumptions at enterprises, and the recovery of downstream orders.
Overall outlook:On the macro front, high US Treasury yields and a strong US dollar continued to weigh on valuations in the nonferrous metals sector, while expectations for US Fed interest rate hikes within the year repeatedly disturbed market sentiment. On the industry front, domestic aluminum ingot inventory buildup after the holiday weakened price support to some extent. Coupled with weaker demand for liquid aluminum and a rebound in casting ingot volumes, as well as adjustments in fund open interest around the long holiday, the tug-of-war between longs and shorts in the market intensified notably. Overall, bullish and bearish factors are intertwined for aluminum prices in the short term, and prices are expected to consolidate on a weak note.
[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 their own independent judgment. Any decisions made by clients have nothing to do with Shanghai Metals Market.]
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