SMM monthly forecast: Despite Yunnan production cuts, muted demand and high social inventory to keep aluminium prices from rising

In November, the Fed suspended interest rate hikes, in line with mainstream expectations, but may further increase interest rate, believing that the degree of additional tightening will hinge on economic and inflation trends. Domestically, manufacturing PMI in October dropped significantly to the contraction territory, and PPI and CPI data in October were both negative. However, the market expected that favourable policies will continue to be released to boost demand in China. In terms of fundamentals, due to production cuts in Yunnan, aluminium supply shortfalls in China may be reported at the end of November. Traditional lull demand will unfold and limited orders will make operating rates of aluminium extrusion and plate/sheet, strip and foil low. Therefore, aluminium inventory is unlikely to decline in November. In a word, supply and demand in Chinese aluminium market declined in November. Meanwhile, ample inventory and absent positive macro news were reported. Under this circumstance, aluminium market will probably move sideways. SMM predicted that the most-traded SHFE aluminium futures contract will be 18,500-19,600 yuan/mt from November 11 to December 10. Players will need to pay attention to aluminium supply and demand in the southwest China.