SHANGHAI, Sep 24 (SMM) — The US dollar index recorded an eight-week high the day before yesterday due to the sluggish macro sentiment under pandemic. The ferrous and nonferrous metals fell for the most part, aluminum prices followed the trend, and the daily K line basically pared all the gains in the previous two days. SHFE Aluminum 2010 contract has always kept fluctuating rangebound since August, showing no obvious trend. As National Day is approaching, the trade will be suspended for 8 days. The change before that has become the focus of market attention.
SMM believes that, apart from macro news factors, the focus that affects the trend of aluminum prices before the National Day holidays is still on the consumption side.
On the supply end, SMM data showed that with the increasing and resuming production capacity of primary aluminum in Sichuan, Yunnan and Inner Mongolia, the domestic primary aluminum operation capacity has risen to 37.8 million mt/year as of mid-September, and the built capacity stood at 42.9 million mt/year. There is pressure on the supply side in Q4 and Q1 next year.
On the inventory end, although primary aluminum inventories across the mainstream consumption areas in China has increased, the growth rate is less than expectations. The increase is only within 20,000 mt since August. Primary aluminium ingots across eight consumption areas in China totalled 740,000 mt, and inventories are always at a relatively low level. Low inventories supported the supply side in the long term. The focus of the market is whether the expectations of the peak season on consumption can be realized as scheduled.
An SMM survey showed that consumption in September remained unchanged from August, but slightly weaker than expectations. The aluminum strip and foil consumption were stable in September, and the overall aluminum extrusion were flat month-on-month. However, the recovery of construction aluminum extrusion was less than original expectations, and the alloy consumption improved steadily with weak consumption of aluminum wires and cables. The market's attitude towards October tends to be neutral.
Short-term consumption is expected to improve due to the pre-holiday demand for raw materials in downstream factories. However, the future trend of aluminum prices will be more guided by the changes of consumption amid doubts about the future consumption prosperity of the end-user market, and SMM will continue to monitor.
