Macro Tailwinds Underpin While Fundamentals Play Out, Aluminum Prices Likely to Fluctuate at Highs in Short Term [SMM Aluminum Morning Brief]

SMM September 4:

Futures side, the most-traded SHFE aluminum 2510 contract opened at 20,710 yuan/mt in the previous trading day's night session, with the highest price at 20,760 yuan/mt, the lowest at 20,700 yuan/mt, and closed at 20,725 yuan/mt, up 0.07% from the previous closing price. Trading volume was 36,000 lots, and open interest was 215,000 lots. In the previous trading day, LME opened at $2,623/mt, with the highest price at $2,623.5/mt, the lowest at $2,607/mt, and closed at $2,614/mt.

Macro perspective, US Fed Governor Waller explicitly supported an interest rate cut this month and planned multiple subsequent cuts, signaling easing. Meanwhile, the US Treasury Secretary began interviewing candidates for the next Fed chair this week. Former President Trump had persistently pressured for rate cuts and threatened to dismiss Powell, while economists jointly voiced support for Fed Governor Cook to maintain its independence, boosting market expectations for Fed easing. Additionally, US July JOLTS job openings fell to 7.181 million, exceeding the expected decline, reflecting cooling labour market demand and further reinforcing the necessity for Fed rate cuts. Overall, the macro environment created favorable conditions for the aluminum market.

Fundamentals showed a mixed picture: inventory side, aluminum ingot inventory in major domestic consumption areas showed a buildup. On September 4, SMM statistics showed domestic mainstream consumption area aluminum ingot inventory at 626,000 mt, up 3,000 mt from Monday and 6,000 mt from last Thursday. LME aluminum inventory saw a slight short-term decrease, down 0.34% over the past week, but accumulated a 3.42% increase over the past month, indicating persistent overall inventory pressure. Supply side, the commissioning of a small amount of replacement capacity pushed operating aluminum capacity to a slight increase, with production edging up. The proportion of liquid aluminum may rebound in September. Cost side, weekly changes were relatively small, and the industry maintained high profits. Although demand side was the market focus, with the September-October peak season approaching, operating rates in downstream sectors such as aluminum extrusion and aluminum plate/sheet, strip and foil showed signs of recovery last week. However, consumption had not fully materialized, and subsequent peak season demand realization needed continuous monitoring.

Integrating macro and fundamental information, aluminum prices in the traditional September peak season were more likely to rise than fall overall, but top-side pressure remained. For aluminum prices to effectively break through the key resistance level of 21,000 yuan/mt, the realization of peak season consumption expectations during the September-October period was needed. In the short term, prices were expected to fluctuate at highs.

[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make decisions cautiously and not use this to replace independent judgment. Any decisions made by clients are unrelated to SMM.]