Escalating China-US trade tensions to weigh on aluminum prices in the short term [SMM Aluminum Morning Meeting Minutes]

SMM Aluminum Morning Meeting Minutes, 10.13

Futures: The SHFE aluminum 2511 contract fluctuated downward during the night session of October 10, closing at 20,755 yuan/mt, down 1.59%. The MA indicators show that MA5 (20,766), MA10 (20,764), and MA30 (20,764) are all above the closing price, with short-term moving averages in a bearish arrangement, indicating price pressure; open interest decreased by 11,501 lots, reflecting low market participation and limited downward momentum; in the MACD indicator, both DIF and DEA are negative, and the MACD histogram is -0.9044, confirming the continuation of the bearish trend. SHFE aluminum broke below support and declined during the night session, with a technically bearish bias. The key resistance level is 21,050-21,100 yuan/mt, where resistance is strong; the primary support below is at the night session low of 20,730 yuan/mt. If this level is breached, it may test the 20,600-20,700 range.

Primary Aluminum Market: SHFE aluminum fluctuated downward, with the price center dropping from around 21,060 yuan/mt to near 21,000 yuan/mt. In East China, at the opening, actual transactions were at a discount of 20 yuan/mt to parity against the SMM average price. However, as traders became more optimistic about future premiums and discounts, purchasing increased, leading to a slight improvement in trading sentiment. Actual transactions narrowed to a discount of 10 yuan/mt to parity against the SMM average price. Last Friday, the selling sentiment index in the East China market was 2.80, up 0.09 WoW; the buying sentiment index was 2.60, up 0.05 WoW. Last Friday, SMM A00 aluminum was quoted at 20,980 yuan/mt, up 20 yuan/mt from the previous trading day, at a discount of 50 yuan/mt against the 2510 contract, down 10 yuan/mt from the previous trading day. In the Central China market, as futures prices remained above 21,000 yuan/mt, downstream purchasing weakened, and trading further softened. Intraday actual transactions were mainly at a discount of 40-30 yuan/mt against the SMM Central China aluminum price. Last Friday, the selling sentiment index in the Central China market was 2.69, down 0.08 WoW; the buying sentiment index was 2.51, down 0.06 WoW. SMM Central China A00 recorded 20,950 yuan/mt, down 10 yuan/mt from the previous trading day, at a discount of 80 yuan/mt against the October contract, down 40 yuan/mt from the previous trading day. The price spread between Henan and East China decreased by 30 yuan/mt WoW to -30 yuan/mt.

Recycled Aluminum Raw Materials: Last Friday, spot primary aluminum prices rose slightly compared to the previous trading day, with SMM A00 spot closing at 20,980 yuan/mt, while aluminum scrap market prices generally increased. With the traditional peak season half over, tight supply remains the main theme in the aluminum scrap market, keeping procurement prices high, though the sustainability of these high levels remains to be seen. Last Friday, baled UBC was quoted at 15,850-16,450 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was quoted at 17,500-18,000 yuan/mt (ex-tax). Baled UBC rose by 150 yuan/mt WoW, while shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hubs, and mechanical casting aluminum scrap each increased by 100 yuan/mt WoW. On the day after the National Day holiday, major secondary aluminum hubs such as Anhui, Jiangxi, and Foshan raised prices by 100-150 yuan/mt today, following yesterday's A00 aluminum gains to further lift aluminum scrap quotations. Divergent views emerged regarding the subsequent trend of aluminum scrap prices. Some participants in the secondary industry believe that after the holiday, aluminum scrap prices will maintain a strong, fluctuating pattern, as the tight supply fundamentals are unlikely to ease in the short term, providing solid support for prices. They expect aluminum scrap prices in October to be guided higher by primary aluminum prices. However, other feedback suggests that while downstream demand is stable with a positive trend, scrap utilization enterprises still have limited acceptance of high-priced raw materials and a tendency to drive down prices, which may restrain the upside for prices. According to SMM's comprehensive assessment, the overall aluminum scrap market in October is still expected to hold up well, with the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) projected to hover around 17,500-18,000 yuan/mt. The market should closely monitor the sustainability of post-holiday downstream demand and further guidance from primary aluminum price movements.

Secondary Aluminum Alloy: On the futures front, the most-traded cast aluminum alloy futures contract for December 2025 (2512) opened at 20,680 yuan/mt last Friday, reached a high of 20,775 yuan/mt, fell to a low of 20,495 yuan/mt, and finally closed at 20,540 yuan/mt, down 75 yuan/mt or 0.36% from the previous trading day. Open interest stood at 12,716 lots, with a trading volume of 3,638 lots; the session was dominated by bearish position increases. In the spot market, the SMM A00 aluminum price rose by 20 yuan/mt from the previous day to 20,980 yuan/mt last Friday, while the SMM ADC12 price held steady at 21,100 yuan/mt. Driven by tight supply and stronger prices, aluminum scrap prices saw significant increases, and secondary aluminum enterprises showed strong pricing adjustment sentiment under cost support. Post-holiday demand is gradually recovering, but downstream players mostly focused on digesting inventories or purchasing as needed, leading to generally moderate overall transactions. Currently, the raw material segment remains undersupplied, and enterprises face substantial procurement and cost pressures. At the same time, stable and improving demand provides upward support for prices; however, continuously rising social inventories are exerting some downward pressure on prices. It is expected that ADC12 prices will maintain a strong, fluctuating trend in the short term. Moving forward, close attention should be paid to raw material supply conditions, changes in social inventories, and the pace of post-holiday demand recovery.

Aluminum Market Summary: Macro Front: China noted the US announcement of plans to impose 100% tariffs on Chinese goods. The US actions severely harm China's interests and seriously undermine the atmosphere of bilateral economic and trade talks, to which China firmly objects. On the evening of October 12, US Vice President Vance, in an interview regarding Trump's latest tariff threats, signaled some moderation. Vance stated during the program: "Trump is willing to engage in rational negotiations with China." (Bearish ★) Fundamental Side: After entering October, some northern aluminum enterprises reported that, driven by peak season demand for downstream processed products, the proportion of liquid aluminum direct supply is expected to increase. This will directly keep aluminum ingot production at low levels, reducing spot aluminum ingot supply in the market and providing supply-side support for aluminum prices. Inventory side, according to SMM data, domestic aluminum ingot social inventory was approximately 649,000 mt on October 9: up 57,000 mt MoM from September 29, and up 32,000 mt MoM from September 25. From a seasonal perspective, no excessive seasonal inventory buildup occurred this year, with inventory at a low level for the same period. Downstream consumption side, peak season resilience was prominent, limiting spot discounts. Against the backdrop of seasonal peak demand, even as aluminum prices rose to a high of 21,000 yuan/mt, spot market discounts were not deep (the spot-futures price spread did not widen significantly), further confirming demand's supportive effect on prices. Comprehensive Outlook: Short-term, last Friday Trump threatened to impose 100% tariffs on China, causing SHFE aluminum to break below support levels in the night session, but Vance released signals of negotiation easing, partially alleviating market concerns. Fundamentals provide underlying support; northern aluminum enterprises increased the proportion of direct liquid aluminum supply, keeping aluminum ingot production at low levels, indicating tight supply. Inventory remains low for the period without excessive seasonal buildup, and downstream peak season demand resilience is evident with limited spot discounts, confirming consumption's cushioning effect on prices. Current aluminum prices are still at a relatively high level; high prices will gradually suppress the procurement pace of downstream buyers, and some small and medium-sized processing enterprises may reduce purchases or delay orders due to cost pressure, leading to marginal weakening in demand and thus limiting upside room for prices. The aluminum market is expected to maintain a pattern of fluctuating at highs. Subsequent focus will be on changes in China-US trade relations and the trend of aluminum ingot inventory.

[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.]