As macro sentiment is expected to stabilize and fundamentals of supply and demand are improving, aluminum prices are expected to stabilize next week

This week, macro sentiment was relatively cautious. After the US Fed almost confirmed a rate cut in September, the release of US July PCE data, US August ISM Manufacturing PMI, and US July job vacancies data caused market expectations for a 25 or 50 basis point rate cut in September to fluctuate. Domestically, the official manufacturing PMI for August was below the threshold, but policies in Jiangsu, Shanghai, and other regions to replace old products with new ones provided momentum for demand improvement.
Fundamentals side: This week, the operating capacity of domestic aluminum enterprises remained largely stable WoW. According to SMM data, as of now, the operating capacity of domestic aluminum enterprises is 43.49 million mt, with a daily production of about 119,000 mt and a daily casting ingot volume of about 32,000 mt. In September, most domestic aluminum enterprises are expected to maintain stable operations, with total production in September expected to increase by 1.3% YoY to around 3.57 million mt. Cost side: This week, domestic aluminum costs showed mixed performance. Domestic spot alumina still has upside potential, with spot prices showing a slight increase, while mainstream prices of prebaked anode in September slightly decreased MoM. According to the SMM daily cost model for aluminum, as of this Thursday, the immediate full cost of the domestic aluminum industry is about 17,710 yuan/mt, up 16 yuan/mt from last Thursday, with immediate industry profits at about 1,590 yuan/mt, down 267 yuan/mt from last Thursday. Overseas market: This week, the import window for the domestic primary aluminum market remained closed, with few imported spot sources. The net import volume of domestic aluminum ingots in August is expected to remain around 120,000 mt. Demand side: This week, domestic downstream operations maintained a positive trend, with improved orders in the industrial products and aluminum plate/sheet, strip and foil sectors, and stronger restocking intentions among enterprises. Additionally, the US, Canada, and other countries recently announced plans to impose tariffs on Chinese aluminum semis. Before these policies take effect, overseas markets have increased their restocking of Chinese aluminum semis, stimulating a rise in orders for some domestic aluminum semis export enterprises. In September, domestic aluminum semis exports are expected to show an increase MoM. Overall, aluminum prices showed weak consolidation this week, with good downstream restocking enthusiasm, and domestic aluminum social inventory showed a destocking trend, with spot discounts narrowing significantly.
Overall, on the macro side, the US ISM Manufacturing PMI fell short of expectations, raising concerns about an economic recession, increasing market panic, and weakening risk appetite, putting pressure on industrial products. The market is awaiting guidance from the non-farm payrolls data on Thursday night. Domestically, the August manufacturing PMI fell to 49.1% MoM, indicating a decline in economic sentiment. China's fiscal policies continue to strengthen, maintaining the main tone of stable and positive domestic economic development. On the fundamentals side, the domestic aluminum supply side is expected to remain stable in the short term, with a decline in casting ingot volume expected, and alumina costs still have upside potential. On the demand side, demand is gradually improving in September, with domestic aluminum social inventory entering a destocking cycle. After macro sentiment stabilizes, aluminum prices may find support from the demand side. Next week, aluminum prices are expected to largely fluctuate rangebound, with SMM predicting that the most-traded SHFE aluminum contract will fluctuate between 18,880 and 19,910 yuan/mt. LME 3M is expected to fluctuate between $2,330 and $2,480/mt. Continued attention is needed on aluminum consumption and macroeconomic changes.