Demand Shows No Significant Improvement, Inventory Turning Point Yet to Arrive, Aluminum Prices Remain Under Pressure in the Short Term [SMM Aluminum Price Weekly Review]

SMM Sep. 4:

Macro perspective: Domestically, according to NBS data, the August manufacturing PMI remained below the 50 mark but rebounded 0.1 percentage point MoM, while the composite PMI output index reached 50.5%, up 0.3 percentage points MoM. The Ministry of Finance and State Taxation Administration issued the "Notice on Tax Policies for the Operation and Management of State-Owned Equity and Cash Proceeds Transferred to Replenish Social Security Funds," involving certain preferential tax policies. The central bank disclosed liquidity injection data for various tools in August, alleviating cash liquidity pressure in industries. Overseas, expectations for US Fed interest rate cuts further intensified. According to CME, there is a 97.6% probability of a 25-basis-point rate cut in September and a 52.1% chance of another 25-basis-point cut in October. The overall macro environment remains favorable both domestically and internationally.

Fundamentals side: Supply side, with the continuous commissioning of replacement capacity, weekly aluminum production increased slightly to 847,300 mt. Cost side, the domestic aluminum full cost stood at 16,618 yuan/mt, down 36 yuan/mt WoW, while industry average profits narrowed to around 3,991 yuan/mt, decreasing 84 yuan/mt WoW. Spot market, aluminum prices fluctuated between 20,620-20,740 yuan/mt this week, with spot cargoes maintaining a discount. As price gains pulled back and the spot-futures price spread remained low, suppliers refused to budge on prices amid restocking demand from downstream enterprises. Downstream data showed only a slight WoW rebound in operating rates, indicating no substantial improvement in actual demand. Although consumption showed no clear recovery, rod plants exhibited signs of production increases. The proportion of liquid aluminum rose to 75.63% WoW, while casting ingot volumes declined. Inventory side, the pace of aluminum ingot inventory buildup slowed, adding 6,000 mt WoW to 626,000 mt. The anticipated inventory inflection point in mid-September warrants close monitoring.

Overall, the macro environment remains supportive. Fundamentals side, downstream demand showed marginal improvement with higher liquid aluminum ratios and reduced casting volumes, but the aluminum ingot inventory inflection point has yet to materialize, and actual demand lacks significant recovery. Downstream enterprises face limited room for cost increases, suggesting aluminum prices will likely remain capped at 20,900-21,000 yuan/mt. However, expectations for rate cuts and peak season demand should provide downside support. Future price movements depend on peak season consumption realization. SHFE aluminum is expected to trade between 20,400-20,800 yuan/mt next week, while LME aluminum may range from $2,550-2,650/mt.

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