The US Fed's rate cut was as expected, favourable macro front and stable fundamentals will support aluminum prices to fluctuate upward next week

This week, the macro front was bullish. The US Fed started a rate-cutting cycle, lowering the federal funds rate by 50 basis points to 4.75%-5.00%, marking the first rate cut since March 2020. This was in line with market expectations, bringing the market back to an easing stance, which is bullish for commodities. Domestically, the September LPR quotation is about to be released, with current market expectations suggesting a possible decrease of around 20 basis points. Additionally, expectations for a reduction in mortgage rates on existing homes are also strengthening, with the market anticipating a series of economic and consumption stimulus measures to follow.
Fundamentals side: This week, domestic aluminum operating capacity slightly increased, mainly due to the Guizhou Anshun project starting production during the week. The total capacity of this company's resumption is 130,000 mt, expected to reach full capacity by the end of the year, with no significant capacity changes in other regions. Cost side: The domestic spot alumina market fluctuated upward this week, with domestic aluminum costs mainly consolidating at high levels. As of this Thursday, the immediate full cost of domestic aluminum was about 17,664 yuan/mt, up 68 yuan/mt WoW. During the week, domestic spot aluminum prices fluctuated upward, with immediate aluminum profits performing well, up 172 yuan/mt WoW to 2,166 yuan/mt. Import aluminum: Overseas metals saw significant gains this week due to favourable macro front stimuli, widening the price spread between domestic and overseas aluminum, leading to noticeable import losses. The market saw fewer overseas circulating sources, and it is expected that primary aluminum imports in September may not exceed those in August. Demand side: This week coincided with the Mid-Autumn holiday in China, leading to a slight weakening in domestic downstream operations. However, sectors like photovoltaics reported good production schedules, with most maintaining normal production during the holiday. Traditional consumption sectors saw slight declines due to the holiday and high aluminum prices. After the holiday, arrivals increased in regions like Gongyi, leading to inventory accumulation. Wuxi saw no significant increase, but high prices suppressed downstream procurement, leading to an expansion in discounts.
Overall, on the macro front, the US Fed's rate cut was as expected, with the cut slightly exceeding market expectations, leading to a jump initially and then pull back in overseas metals. Domestically, the market is widely focused on the new round of LPR adjustments, with macro sentiment improving, which is bullish for the metals market. Fundamentals side, domestic aluminum market supply slightly increased, supported by the September-October peak season, with downstream consumption remaining generally positive. Aluminum social inventory entered a destocking cycle, with the supply-demand balance for aluminum performing well in September-October. Additionally, disruptions in the alumina market supply side continued to support upward fluctuations in alumina prices, providing some drive from the aluminum cost side. Overall, with a favourable macro atmosphere and stable fundamentals, the aluminum market is expected to fluctuate upward next week. SMM forecasts that the most-traded SHFE aluminum contract will fluctuate between 19,540-20,650 yuan/mt next week, and LME 3M aluminum will range between $2,450-2,600/mt. Future attention should be paid to aluminum consumption and macro changes.