SMM Oct 14 Aluminum Morning Meeting Minutes:
Futures: The most-traded SHFE aluminum 2611 contract closed at 23,355 yuan/mt, down 105 yuan or 0.45% from yesterday's settlement price. It opened at 23,300.00 yuan/mt during the day and fluctuated within a range of 23,300-23,400 yuan/mt. Trading volume was 41,990 lots, and open interest was 240,121 lots, down 826 lots on the day. During the consolidation at lows, both bulls and bears reduced positions slightly. Prices ran below the MA5 (23,399.00), MA10 (23,720.00), MA30 (24,036.17), and MA60 (23,825.58), continuing the low-level consolidation and repair after drifting lower, with the moving averages above forming key resistance pressure. The MACD DIF (-167.5673) was below the DEA (-57.5398), and the MACD green bar stood at -220.0549. Bearish momentum remained relatively strong. The suggested core trading range for SHFE aluminum is 23,100-23,700 yuan/mt. The LME aluminum 3M contract closed at $3,040.50/mt, up 0.20%. It opened at $3,031.00/mt during the day and fluctuated within a range of $3,031.00-3,041.00/mt. Prices ran below the MA5 (3,044.20), MA10 (3,082.80), MA30 (3,209.38), and MA60 (3,221.64), showing a slight low-level repair after continued declines. A low-level weak consolidation structure emerged, with the moving averages above forming clear resistance. The MACD DIF (-58.0074) was below the DEA (-43.2079), and the MACD green bar was -29.5991. Bearish momentum still held the upper hand. The suggested core trading range for LME aluminum is $2,900-3,150/mt.
Macro front: Fed's Williams said one more rate hike this year is appropriate; he currently sees no need for rate hikes in 2027. There are no signs that the labour market is driving inflation, and apart from AI and the energy sector, he does not see widespread price pressures in other areas. Fed's Collins said the future path of monetary policy will depend on data, and she expects the Fed to raise rates further before the end of the year; she expects inflation to gradually decline to 2%; data center construction is putting pressure on inflation data. US President Trump said a decision on Iran will be made soon. Trump accused Yemen's Houthi forces of striking Saudi Arabia by "very vicious" means and likely deliberately pushing up oil prices ahead of the US midterm elections. Trump said he has spoken with Saudi Crown Prince and Prime Minister Mohammed and may ask Turkey to participate in actions against Yemen's Houthi forces. The Houthis called Saudi Aramco facilities "legitimate targets" and warned that if the US joins Saudi Arabia's military operations against the Houthis, they will respond "swiftly and painfully" against the US and its interests in the region.
Fundamentals: Low inventory is the core support for aluminum prices, with LME aluminum inventory falling to 241,000 mt at end-September. On the supply side, production resumptions in the Middle East and production ramp-up at new projects in Indonesia, Vietnam, and India pushed daily average production higher. On the demand side, the September-October peak season lifted the comprehensive operating rate MoM, but processing fees for some processed products came under pressure, leading to production cuts and halts, with the proportion of liquid aluminum falling to 78.2%. In terms of domestic aluminum ingot social inventory, as of Monday this week, China's aluminum ingot social inventory stood at 651,000 mt, destocking by 35,000 mt from last Thursday and building up by 13,000 mt from pre-holiday levels, with aluminum destocking resuming.
Primary aluminum market: In east China, SHFE aluminum's center fell again yesterday, and as futures declined, downstream buying sentiment improved. The market began quoting spot prices against the SHFE aluminum 2611 contract. At the open, spot prices were at a premium of 200-220 yuan/mt against the SHFE aluminum 2611 contract, with the price spread between futures contracts in backwardation of 160-180 yuan/mt at the time. As the spread continued to widen to above 200 yuan/mt, spot prices against the SHFE aluminum 2611 contract rose to a premium of 240-260 yuan/mt. In central China, the price spread between SHFE aluminum November contract futures was significant, with spot premiums against futures surging. Yesterday, suppliers in central China showed slightly higher selling sentiment than the previous day, but sentiment to hold prices firm was not strong. Downstream processing enterprises showed mediocre buying sentiment, mainly making just-in-time procurement with notable push for lower prices. Ultimately, actual transaction prices in central China were around a discount to premium of 110-130 yuan/mt against the SHFE aluminum November contract. In south China, aluminum prices fell sharply yesterday, and the spot market was weak. Long and short funds battled fiercely in futures, with the backwardation structure in SHFE aluminum fully opening up. Even with early contract rollover, the basis for the next month and further months remained extremely high. There was a general intention to sell and cash out first, though at different paces, with mainstream quotes in the discount to parity range and actual circulating discounts in the majority. Buying on dips proceeded steadily to replenish stocks, but apart from just-in-time procurement for delivery obligations, it was difficult to act given the futures spread structure, and transactions were poor.
Aluminum scrap: Yesterday, SMM A00 aluminum price closed at 23,710 yuan/mt, down 100 yuan/mt from the previous trading day. Price performance diverged across aluminum scrap categories, with baled UBC down 50 yuan/mt yesterday and aluminum tense scrap prices down 100 yuan/mt. In terms of price differences, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,433 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 1,101 yuan/mt. By mid-October, the aluminum scrap market continued to hold up well. On the supply side, aluminum scrap yards have all briefly resumed operations, with some increase in material release, but recycling policies still constrain circulation. Invoice quota limitations are widespread, and the tight invoice supply situation is unlikely to change in the short term, with tight supply continuing to support prices. Demand side, as the traditional peak season for cast aluminum alloy consumption gradually kicks off, enterprises are accelerating their order-taking and procurement pace. Under the tight supply-demand situation for aluminum tense scrap, price support strength is expected to move to a higher level. Demand for wrought aluminum alloy is moderate, and in-factory inventory is relatively sufficient. However, with tax inspection restrictions reducing the expected supply of aluminum scrap, the price uptrend channel will also gradually open up.
Secondary aluminum alloy: Futures: Yesterday, the most-traded AD2612 cast aluminum alloy contract opened at 23,100 yuan/mt. After briefly shooting up to a daily high of 23,110 yuan/mt in early trading, it weakened step by step, dipping to a low of 22,880 yuan/mt in the morning session, then consolidating and rebounding. It closed at 23,045 yuan/mt at midday, down 285 yuan/mt or 1.22% from the previous settlement price of 23,330 yuan/mt. Spot: Yesterday, the ADC12 market was mainly stable with a wait-and-see sentiment. The SMM ADC12 price remained flat from the previous day at 24,500 yuan/mt, showing some resilience in market prices. Cost side, aluminum scrap raw material prices remained relatively firm, and tax invoice factors continued to affect compliant raw material supply. Enterprise production costs and procurement pressure persisted, providing strong support for ADC12 prices and limiting the downside for spot prices. However, demand-side improvement was limited, with the traditional September-October peak season underperforming expectations. Downstream procurement enthusiasm was insufficient, and upward price momentum was also weak. In the short term, prices are expected to continue consolidating, with attention needed on aluminum price trends, changes in compliant raw material supply, and downstream order improvements.
Comprehensive outlook: Macro dimension, the US dollar remains at elevated levels, and expectations for US Fed interest rate hikes within the year persist, continuing to weigh on valuations in the nonferrous metals sector. Industry dimension, the actual improvement in demand during China's traditional peak season has not fully met earlier expectations. In a high-price environment, downstream procurement has turned more cautious, weakening price support. China's aluminum ingot social inventory has resumed destocking, providing some price support. Overall, bullish and bearish factors are intertwined for aluminum prices in the short term, and prices are expected to maintain a rangebound consolidation on a subdued note in the near term.
[The information provided is for reference only. This article does not constitute direct investment research decision-making advice. Clients should make decisions prudently and should not use this as a substitute for independent judgment. Any decisions made by clients are not related to SMM.]
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