Interest Rate Cut in Line with Expectations but Powell's Hawkish Stance; Aluminum Market Fundamentals Remain Strong Seeking Support [SMM Aluminum Price Weekly Review]

On the macro front, the US Fed cut interest rates by 25 bps as expected, acknowledged a weakening labor market, and mentioned inflation issues. The dot plot indicates two additional rate cuts in 2025 and one in 2026, largely in line with market expectations, but Powell's remarks were more hawkish than anticipated. As a result, risk-off operations began ahead of the meeting, leading to widespread position reductions and adjustments in commodities, with SHFE aluminum also showing a pullback amid reduced positions. Additionally, although the structural risk in LME aluminum inventory has decreased, the specific flow of cancelled warrants still needs continuous monitoring to determine the actual inventory trend.

Currently, aluminum supply is experiencing slight growth driven by the ramp-up of replacement capacity, but the supply-demand pattern is marginally improving: against the backdrop of falling aluminum prices, processing plants have some stockpiling demand for the upcoming holidays, and the pace of social inventory buildup has significantly slowed, easing inventory pressure compared to earlier. Cost side, the full cost of the aluminum industry is currently 16,363 yuan/mt, down 74 yuan/mt WoW. With spot alumina prices remaining weak, there is further downside room for aluminum industry costs.

Going forward, focus will be on holiday stockpiling in aluminum consumption. In the short term, after the price center pulled back this week, downstream purchasing rebounded slightly, and spot premiums remained firm. Medium-term, aluminum consumption is generally recovering, with stable growth in automotive aluminum use, emerging growth expectations in power sector aluminum demand, and marginal recovery in construction aluminum consumption; operating rates at processing plants are steady or rising. Fundamentally, with no supply pressure and consumption rebounding, an inventory inflection point is gradually approaching, providing support below aluminum prices. The most-traded SHFE aluminum contract is expected to trade between 20,600-21,000 yuan/mt next week, with a price center of 20,700 yuan/mt; LME aluminum is projected to range between $2,620-2,700/mt.

The SMM model forecasts the closing price of the most-traded aluminum contract from this Friday to next Thursday (2025-09-25) to range between [20,650, 21,270], with a price center of 20,930, in yuan/mt. The extreme price range is [20,340, 21,580], the normal range is [20,550, 21,370], and the conservative range is [20,750, 21,170]. Next week's price movement is expected to fluctuate rangebound or in the doldrums. The support range is [20,550, 20,750], and the resistance range is [21,170, 21,370].

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