Macro: This week, China released multiple favorable policies. From September 25, mortgage rates for first-time homebuyers were reduced. The Ministry of Housing and Urban-Rural Development planned to implement more measures to lower down payments and interest rates for first-time buyers, improve tax and fee reductions for housing replacement, and adjust housing loan policies. On September 26, the Ministry of Finance and the State Administration of Taxation extended tax and fee incentives until 2027, promoting optimism in consumer spending recovery.
Fundamentals：This week, Chinese aluminium smelters have maintained stable production. SMM's research shows that during the week-long holiday, downstream aluminium processing enterprises, such as aluminium billet, will continue stable production with minimal shutdowns or vacations. Domestic molten aluminium ratio is expected to remain stable during the holiday, and cast ingot output will not significantly increase. The price gap between South and East China has widened, leading to cross-regional arbitrage by some South China traders. This may reduce pressure on spot goods in South China, while East China may see a larger inventory accumulation after the holiday, supplemented by imports and goods from South China. This week, the coal market cooled down slightly, with port coal prices decreasing. Despite this, coal prices are expected to rise due to upcoming winter storage and a 7% increase in Russia’s coal export tariffs from October 1. Additionally, domestic aluminium processing companies experienced a decline in operations, primarily due to a decrease in the extrusion sector's operating rate before the holiday. Construction extrusion companies reported fewer orders, higher raw material prices, and lower operating rates. During the holiday period, aluminium plate, sheet, and foil sectors will continue production, with some companies taking around 3 days of vacation.
In summary, the US and European central banks had different policies, with the Federal Reserve being more likely to raise interest rates while the European Central Bank was less likely to do so. The US dollar index had reached a 10-month high. During the domestic festival period, industrial and manufacturing demand will weaken, resulting in reduced demand in the aluminium market and a potential accumulation of inventory after the holiday. In the short term, aluminium prices lack upward momentum. However, SMM predicted that post-holiday total inventory would remain lower than historical levels, preventing significant declines in aluminium prices. The most-traded SHFE aluminium contract was expected to fluctuate between 18,900-19,700 yuan/mt after the holiday, and the LME aluminium price may fluctuate between $2,180-2,270/mt during the holiday. It was important to keep an eye on post-holiday inventory changes.