Macro Versus Fundamentals, SHFE Aluminum to Fluctuate Upward in the Short Term [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Minutes, 10.1

Futures: In the previous trading day's night session, the most-traded SHFE aluminum 2511 contract opened at 21,110 yuan/mt, reached a highest price of 21,205 yuan/mt and a lowest price of 21,100 yuan/mt, and closed at 21,100 yuan/mt, up 0.05% from the previous close, with a trading volume of 81,000 lots and an open interest of 205,000 lots. In the previous trading day, LME aluminum opened at $2,749/mt, hit a high of $2,807.5/mt and a low of $2,746/mt, and closed at $2,782.5/mt.

Primary Aluminum Market: Boosted by macro sentiment, SHFE aluminum rose sharply in the morning session, with its trading center moving up to around 21,000 yuan/mt. In east China, aluminum ingot inventory built up during the short holiday, coupled with high absolute aluminum prices, leading to poor market transactions; actual transactions were at a discount of 20-10 yuan/mt to the SMM average price. The east China market selling sentiment index was 2.77 on Thursday, down 0.2 WoW; the purchasing sentiment index was 2.55, down 0.22 WoW. SMM A00 aluminum was quoted at 20,960 yuan/mt on Thursday, up 240 yuan/mt from the previous trading day, at a discount of 40 yuan/mt to the 2510 contract, down 20 yuan/mt from the previous trading day. In central China, due to favorable pre-holiday premiums/discounts and inventory performance in Gongyi, aluminum ingot arrivals concentrated, resulting in the largest inventory buildup during the holiday, putting significant pressure on spot premiums/discounts. Sellers actively offered at discounts, with actual transactions during the day mainly at a discount of 30-20 yuan/mt to the SMM central China aluminum price. The central China market selling sentiment index was 2.77 on Thursday, down 0.16 WoW; the purchasing sentiment index was 2.57, down 0.05 WoW. SMM central China A00 aluminum was recorded at 20,960 yuan/mt, up 210 yuan/mt from the previous trading day, at a discount of 40 yuan/mt to the October contract, down 50 yuan/mt from the previous trading day. The Henan-Shanghai price spread decreased by 30 yuan/mt WoW to 0 yuan/mt.

Recycled Aluminum Raw Materials: Spot primary aluminum prices rose sharply on Thursday compared to the previous trading day, with SMM A00 spot aluminum closing at 20,960 yuan/mt, and aluminum scrap market prices generally followed the increase. As the traditional peak season passed its midpoint, tight supply remained the main theme in the aluminum scrap market, keeping procurement prices high, though the sustainability of high levels needs observation. On Thursday, baled UBC scrap was mainly quoted at 15,700-16,300 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was mainly quoted at 17,400-17,900 yuan/mt (ex-tax). Prices for baled UBC, shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, and mechanical casting aluminum scrap rose by 100 yuan/mt WoW. On the first day after the National Day holiday, A00 aluminum surged by 240 yuan/mt, with regional price adjustments varying significantly. Areas like Shanghai, Jiangsu, and Zhejiang followed the aluminum price increase, raising prices by 200-250 yuan/mt, while key secondary aluminum hubs such as Henan, Anhui, Jiangxi, and Foshan held a somewhat reserved attitude towards the sustainability of the aluminum price rally, adjusting prices more cautiously, with increases of 100-150 yuan/mt on Thursday. Price difference between A00 aluminum and aluminum scrap side, the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai rose 240 yuan/mt WoW to 2,222 yuan/mt, while the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan increased 132 yuan/mt WoW to 2,152 yuan/mt. Post-National Day holiday, aluminum scrap prices are expected to hover at highs. On one hand, the tight supply fundamentals of aluminum scrap are difficult to alleviate in the short term, and the supporting effect of pre-holiday downstream stocking demand on prices continues to ferment. On the other hand, there has been no further feedback on the implementation of domestic tax cleanup policies, but from a longer-term perspective, scrap utilization enterprises still have the intention to drive down prices. Overall, the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) is expected to fluctuate around 17,300-17,800 yuan/mt, while baled UBC prices are likely to hover near 15,600-16,100 yuan/mt. The market needs to focus on the sustainability of downstream stocking demand before the National Day holiday, the actual implementation pace of tax policies, and further guidance from primary aluminum price trends.

Secondary aluminum alloy: On the futures front, the most-traded cast aluminum alloy futures contract 2512 opened at 20,320 yuan/mt on Thursday this week, reached a high of 20,640 yuan/mt, a low of 20,310 yuan/mt, and finally closed at 20,615 yuan/mt, up 405 yuan/mt or 2.0% from the last trading day before the holiday. Open interest was 12,169 lots, with a trading volume of 3,198 lots, and the day saw mainly long position increases. In the spot market, the SMM A00 aluminum price surged 240 yuan/mt WoW to 20,960 yuan/mt on Thursday this week, while the SMM ADC12 price increased 200 yuan/mt to 21,100 yuan/mt. Driven by tight supply and the strength of LME aluminum during the holiday, aluminum scrap prices rose significantly, and under cost support, secondary aluminum enterprises generally raised finished ingot quotations. Post-holiday market demand is gradually recovering, but downstream players mostly focus on digesting inventories or purchasing as needed, resulting in generally moderate overall transactions. Currently, the raw material side maintains an undersupply pattern, and enterprises face significant procurement and cost pressures; meanwhile, demand is stable with a positive trend, providing upward support for prices; however, continuously rising social inventory is exerting some downward pressure on prices. ADC12 prices are expected to hold up well in the short term. Follow-up attention should be paid to raw material supply conditions, social inventory changes, and the pace of post-holiday demand recovery.

Aluminum market summary: On the macro front, the minutes from the US Fed's September meeting released on Wednesday showed that Fed officials unanimously agreed that risks in the US job market were sufficient to support interest rate cuts, but opinions on the pace of cuts varied significantly, and they remained vigilant about high inflation. (Bullish ★) The National Day holiday property market saw intensified divergence, with the daily average transaction area for new residential homes in Beijing and Shenzhen increasing 52% and 22% YoY, respectively, while Guangzhou, Hangzhou, and Chengdu all experienced YoY declines in daily average new commercial housing transactions. (Neutral) From a fundamental perspective, on October 9, aluminum ingot inventory in Guangdong was 207,000 mt, in Wuxi was 202,000 mt, and in Gongyi was 95,000 mt, totaling 504,000 mt across the three locations, an increase of 75,500 mt from the previous trading day. Regarding aluminum billet inventory in two locations on October 9, Guangdong held 57,000 mt and Wuxi held 39,500 mt, summing to 96,500 mt, an increase of 22,000 mt from the previous trading day's inventory. Overall, the favorable macro perspective from interest rate cuts and the supply-demand tight balance in fundamentals are creating a synergistic effect, with the aluminum market expected to hover at highs. However, it should be noted that current aluminum prices are already at a relatively high level (around 21,000 yuan/mt). In the previous trading day, the east China market sales sentiment index was 2.77, down 0.2 MoM, while the purchase sentiment index was 2.55, down 0.22 MoM. The dampening effect of high prices on downstream procurement pace will gradually emerge. Some small and medium-sized processing enterprises may reduce purchases or delay orders due to cost pressure, leading to marginal weakening on the demand side, thereby limiting further upside for aluminum prices. Subsequent attention should still be paid to post-holiday domestic consumption and changes in macro sentiment both domestically and internationally.

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