The upcoming Fed rate cut meeting adds macro uncertainty, while the supply-demand side of the aluminum market forms a strong drive

This week, the macro front was relatively stable. Economic data such as US CPI and non-farm payrolls led to fluctuating market expectations regarding the rate cut, but a September rate cut by the US Fed is almost certain. Domestically, CPI in August rose by 0.6% YoY. The Ministry of Finance plans to reissue 45 billion yuan of 20-year ultra-long-term special treasury bonds on September 20, and export data showed positive YoY growth. All these factors bolstered macro sentiment.
Fundamentals side: This week, domestic aluminum operated steadily. No news of start production has been heard yet for the capacities awaiting resumption in Guizhou and Sichuan. During the week, the proportion of aluminum liquid in north-west China and other regions continued to rise. The spot market for aluminum billets saw active transactions, stimulating the enthusiasm for primary aluminum billet production. It is expected that the total domestic casting ingot production in September will mainly decrease MoM. Overseas market: During the week, Press Metal Bintulu in Malaysia experienced a sudden fire accident. According to the company's announcement, the incident caused 100 electrolysis cells in the plant's third phase to stop operating, with recovery possibly taking four months, affecting an annualized aluminum capacity of approximately 100,000 mt. The monthly reduction is estimated to be around 8,300 mt. However, there are market rumors that the entire 320,000 mt capacity of the plant's third phase has been shut down. SMM will continue to monitor the situation of this plant. During the week, domestic primary aluminum imports remained closed. The overseas aluminum ingot turnover was limited, and some downstream feedback indicated the presence of Russian aluminum rods in the market, which performed well in cost-performance and may see continual increases. Demand side: Domestic aluminum processing enterprises maintained a growth trend in operating rates, transitioning gradually into peak season for the aluminum plate/sheet and strip and foil sectors. Orders for construction extrusions also began to increase, driven by the season's improvement in domestic construction activities. The aluminum wire and cable segment continued to be in a concentrated delivery period, with positive operating rates. During the week, domestic spot aluminum inventory showed strong depletion, spot aluminum in Henan and Shanghai turned to premium status, and some regions reported good aluminum billet orders and active downstream restocking.

In conclusion, on the macro front, the US August CPI YoY was 2.5%, basically in line with expectations, and the market expects the Fed to cut rates by 25 basis points next week. Meanwhile, after the first debate between Harris and Trump, Harris' support rate rebounded, and the market revised the "Trump trade," leading bears to reduce their positions in industrial products. During the week, the Ministry of Ecology and Environment released the "Work Plan for the National Carbon Emissions Trading Market Covering Cement, Steel, and Aluminum Industries (Draft for Comments)," indicating that aluminum will soon be included in the national carbon emissions market. On the fundamentals side, domestic aluminum operated steadily in the short term, while overseas production cuts emerged, suggesting that the supply side will gradually peak in the future. Meanwhile, the demand side is entering peak season, with robust aluminum demand, strong depletion in aluminum social inventory, and fundamental supply-demand dynamics turning to strong support. Next week, aluminum prices are expected to fluctuate upward against a backdrop of strong fundamentals and macro uncertainties. SMM forecasts that next week, the most-traded SHFE aluminum contract will fluctuate within the range of 19,000-19,990 yuan/mt, while LME 3M aluminum will operate in the range of $2,330-2,480/mt. It is still necessary to pay attention to aluminum consumption and macro changes in the future.