Domestic and Overseas Macro Tailwinds, Multiple Factors Support Aluminum Prices to Hold Up Well in the Short Term [SMM Aluminum Morning Briefing]

SMM 9.16 Aluminum Morning Brief:

In the futures market, the most-traded SHFE aluminum 2510 contract opened at 20,995 yuan/mt during the night session, reaching a highest price of 21,095 yuan/mt and a lowest price of 20,955 yuan/mt, closing at 21,060 yuan/mt, up 40 yuan/mt from the previous close, with a gain of 0.19%. The trading volume was 48,200 lots, and the open interest was 178,000 lots. LME opened at $2,698/mt, reached a highest price of $2,705/mt, and a lowest price of $2,680/mt, closing at $2,704.5/mt.

On the macro front, the overall sentiment is bullish. Domestically, NBS data showed that industrial output in August increased 5.2% YoY and 0.37% MoM, with a 6.2% YoY increase for January-August, supporting aluminum demand. Spokesperson Fu Linghui also noted that the economy in August was stable and high-quality development advanced, boosting market confidence in aluminum demand, driving prices from the demand side. On Monday, Trump called on Fed Chairman Powell to cut interest rates by a "bigger margin" and mentioned the real estate market. According to CME's FeWatch tool, traders have fully priced in a 25-basis-point rate cut at the FOMC meeting on September 16-17, with a 5% probability of a 50-basis-point cut, providing supportive conditions for aluminum prices.

Fundamentally, as we enter the traditional peak season in September, the proportion of liquid aluminum is expected to rebound slightly. Although weekly costs have declined somewhat due to weaker alumina support, the demand side has shown signs of recovery, with many extrusion enterprises reporting improved order situations. The operating rate of leading domestic aluminum extrusion enterprises rose 1 percentage point MoM to 54%. In terms of inventory, although outflows from warehouses have improved in September, premiums and discounts remain under pressure. It is reported that while in-transit cargoes are expected to decrease, the decline is not significant. Inventory data on Monday again showed an inventory buildup, and whether destocking will turn around in mid-September remains to be observed. Overall, both domestic industrial data and international interest rate cut expectations are bullish for aluminum prices, providing upward momentum. Coupled with the overall improvement in fundamentals, SMM expects aluminum prices to hold up well in the short term.

[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make prudent decisions and not rely solely on this information, as any decision made by clients is unrelated to SMM.]