Significant Macro Support, Aluminum Prices More Likely to Rise Than Fall in September Amid Tug-of-War Between Sellers and Buyers [SMM Aluminum Morning Meeting Summary]

9.2 SMM Aluminum Morning Meeting Minutes

Futures: During the previous night session, the most-traded SHFE aluminum 2510 contract opened at 20,650 yuan/mt, with the highest price at 20,730 yuan/mt, the lowest at 20,640 yuan/mt, and closed at 20,690 yuan/mt, up 0.22% from the previous closing price. Trading volume was 38,000 lots, and open interest stood at 218,000 lots. The previous LME session opened at $2,614/mt, reached a high of $2,620/mt, a low of $2,605/mt, and closed at $2,619.5/mt.

Macro: (1) According to CME's "FedWatch Tool", the probability of the US Fed maintaining unchanged interest rates in September is 10.4%, while the probability of a 25-basis-point rate cut is 89.6%. For October, the probability of unchanged rates is 4.9%, with cumulative probabilities of 47.3% for a 25-basis-point cut and 47.9% for a 50-basis-point cut. (Bullish★) (2) US Treasury Secretary Scott Bessent stated that the Trump administration may declare a national housing emergency this fall. (Bullish★)

Fundamentals: (1) SMM data shows that in August 2025, the average tax-inclusive full cost of China's aluminum industry was 16,429 yuan/mt, up 1.0% MoM but down 4.4% YoY. (Bullish★) (2) On September 1, LME aluminum inventory was recorded at 481,100 mt, flat from the previous day. Over the past week, LME aluminum inventory increased by 2,325.00 mt (0.49%), while over the past month, it rose by 18,300 mt (3.94%). (Bearish★)

Primary aluminum market: During Monday's early session, the center of the front-month SHFE aluminum contract fell to around 20,600 yuan/mt, fluctuating rangebound. Although the aluminum price center declined, market activity remained subdued, with selling dominating and transactions occurring at slight discounts. After 9:30 AM, as the price center continued to drop, buying sentiment improved slightly, with premiums/discounts stabilizing and transactions shifting to the SMM average price. In east China, Monday's selling sentiment index was 3.06 (up 0.02), while the purchasing sentiment index was 2.84 (up 0.11). SMM A00 aluminum was quoted at 20,620 yuan/mt, down 110 yuan/mt from the previous day, at a 30 yuan/mt discount to the 2509 contract (10 yuan/mt wider). In central China, despite the price decline, Monday's activity remained weak due to environmental protection-related production reduction risks, with just-in-time procurement dominating. The region's selling sentiment index was 2.96 (down 0.05), and the purchasing sentiment index was 2.95 (down 0.04). SMM central China A00 aluminum was quoted at 20,490 yuan/mt against the SHFE 2509 contract, down 100 yuan/mt from the previous day, maintaining a 160 yuan/mt discount to the front-month contract.

Recycled aluminum raw materials: Spot primary aluminum prices fell MoM on Monday, with SMM A00 spot aluminum closing at 20,620 yuan/mt. Aluminum scrap prices followed the downtrend. As the traditional peak season approaches, orders from some downstream scrap utilization enterprises recovered. However, tight supply remained the main theme in the aluminum scrap market, keeping purchasing prices elevated and generally moving in line with aluminum price fluctuations. On Monday, baled UBC was quoted at 15,450-15,950 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was quoted at 17,000-17,500 yuan/mt (ex-tax). Prices for baled UBC and shredded aluminum tense scrap (priced based on aluminum content) dropped 100 yuan/mt WoW. Jiangxi region significantly adjusted aluminum scrap quotes on Monday, with aluminum tense scrap down 100 yuan/mt and wrought aluminum alloy scrap down 200-300 yuan/mt, indicating initial effects of policy implementation. Aluminum scrap prices are expected to hover at highs this week amid intensified supply-demand tug-of-war. From a macro perspective, the ongoing special rectification of illegal tax refunds in multiple regions will have a profound impact on the cost structure of the secondary aluminum industry. During the policy transition period, downstream scrap utilization enterprises may further bargain down purchasing prices to offset potential tax cost increases, exacerbating downside risks for aluminum scrap prices. Nevertheless, tight supply conditions are unlikely to ease in the short term, especially for shredded aluminum tense scrap, which will continue to bolster suppliers' bargaining power. SMM expects the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) to fluctuate around 17,100-17,600 yuan/mt (ex-tax), while baled UBC prices will be supported by rigid demand at 15,500-16,000 yuan/mt (ex-tax). Overall, the market needs to closely monitor policy implementation and the strength of September peak season demand recovery, as price trends will depend on the tug-of-war between cost pass-through and supply tightness.

Secondary aluminum alloy: Futures-wise, the most-traded cast aluminum alloy futures contract 2511 opened at 20,350 yuan/mt on Monday, hitting a high of 20,365 yuan/mt and a low of 20,235 yuan/mt before settling at 20,275 yuan/mt, down 75 yuan/mt (0.37%) from the previous close. Open interest stood at 8,221 lots with trading volume of 1,959 lots, as bears dominated position increases. In the spot market, SMM A00 aluminum price fell 110 yuan/mt WoW to 20,620 yuan/mt on Monday, while SMM ADC12 held steady at 20,750 yuan/mt. With regional tax rebate policies remaining unclear post-September, the secondary aluminum market exhibited strong wait-and-see sentiment. Coupled with tight raw material supply, firm cost support kept manufacturers' offers resilient. Demand-wise, approaching traditional peak season drove slight recovery in downstream procurement, but high prices suppressed trading volume, leaving actual demand mediocre. ADC12 prices are expected to fluctuate upward in the near term, supported by costs, low inventory, and policy pressure, though slow demand recovery may limit upside room. Subsequent focus should be on policy implementation progress, aluminum scrap supply recovery, and marginal changes in end-use demand.

Summary: Macro front, expectations for US Fed interest rate cuts and potential US housing stimulus policies, coupled with China's intensified policies to boost domestic demand, collectively create a favorable atmosphere, which is expected to enhance the aluminum consumption outlook. However, it will take time for domestic supportive policies to translate into actual consumption. Fundamentally, supply side, with the commissioning of a small amount of replacement capacity, operating capacity is stable with a slight increase, and production is growing marginally. The proportion of liquid aluminum is expected to rebound in September. Cost side, the weekly total cost of the aluminum industry changed minimally, and high industry profits remain. Demand side remains the core focus for the market going forward. As the September-October peak season approaches, downstream weekly operating rates showed stronger signs of recovery last week, with operating rates in sectors such as aluminum extrusion and aluminum plate/sheet, strip and foil all increasing to some extent. Entering early September, consumption is only showing marginal improvement at present, and it will take time for inventory to achieve effective destocking. However, current total inventory is not high, and some secondary aluminum enterprises in provinces such as Anhui and Jiangxi have received notices of termination of tax rebate policies, posing a risk of declining capacity utilization rates for scrap utilization enterprises, which provides some support for primary aluminum consumption. During the traditional peak season in September, aluminum prices are overall more likely to rise than fall, but upside resistance remains. For aluminum prices to effectively break through the important resistance level of 21,000 yuan/mt, it will require the realization of expectations for the September-October peak season in aluminum consumption, and verification through the subsequent emergence of a destocking inflection point for domestic aluminum ingots and sustained strength in downstream operating performance.

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