US Fed "Newcomer" Supports Another Interest Rate Cut This Year, Aluminum Market Fluctuates at Highs [SMM Aluminum Morning Meeting Minutes]

SMM Aluminum Morning Comment Summary for Oct. 14

Futures: The SHFE aluminum 2511 contract closed at 20,975 yuan/mt, up 0.55%. The MA indicators showed MA5 (20,973), MA10 (20,972), and MA30 (20,971.83) highly converged with the closing price, indicating a rangebound fluctuation pattern; open interest decreased by 3,512 lots, reflecting cautious sentiment among traders. In the MACD indicator, DIFF (0.4192) and DEA (0.2244) maintained a golden cross, but the MACD histogram shortened to 0.3898, suggesting weakened upward momentum. Technically, the market showed a rangebound but slightly stronger trend, with key resistance around 21,050-21,100 yuan/mt and support shifting up to 20,880-20,920 yuan/mt (the night session low and the dense moving average area). The direction of a breakout from this range needs monitoring.

Primary Aluminum Market: The morning comment for SHFE aluminum suggested mainly rangebound trading, with the price center hovering around 20,850-20,870 yuan/mt. In East China, futures prices weakened, downstream buying sentiment rebounded, and sellers held firm on prices, reluctant to sell. Actual transactions were at parity to a premium of about 10 yuan/mt against the SMM average price. The East China market selling sentiment index was 2.94 on Monday, up 0.08 WoW; the purchasing sentiment index was 2.73, up 0.13 WoW. On Monday, SMM A00 aluminum was quoted at 20,800 yuan/mt, down 180 yuan/mt from the previous trading day, at a discount of 50 yuan/mt against the 2510 contract and 50 yuan/mt against the 2511 contract. In Central China, after aluminum prices fell, downstream restocking for rigid demand increased, but market shipments remained relatively high. Coupled with high aluminum prices, downstream purchases were cautious. Intraday actual transactions were mainly at parity to a premium of 10 yuan/mt against the SMM Central China aluminum price. The Central China market selling sentiment index was 2.72 on Monday, up 0.03 WoW; the purchasing sentiment index was 2.61, up 0.10 WoW. SMM Central China A00 aluminum was recorded at 20,760 yuan/mt, down 190 yuan/mt from the previous trading day, at a discount of 90 yuan/mt against the October contract, down 10 yuan/mt from the previous trading day. The Henan-Shanghai price spread narrowed by 10 yuan/mt WoW to -40 yuan/mt.

Recycled Aluminum Raw Materials: On Monday, spot primary aluminum prices declined compared to the previous trading day, with SMM A00 spot aluminum closing at 20,800 yuan/mt. Aluminum scrap prices generally followed the decline. As the traditional peak season passed its midpoint, tight supply remained the main theme in the aluminum scrap market, keeping procurement prices high, but the sustainability of these high levels needs observation. On Monday, baled UBC scrap was quoted in the range of 15,800-16,300 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was quoted in the range of 17,300-17,800 yuan/mt (ex-tax). Baled UBC, shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, and mechanical casting aluminum scrap all fell by 100 yuan/mt WoW. Since former President Trump threatened to impose 100% tariffs on China last Friday, SHFE aluminum broke support and fell during the night session. On October 11, suppliers and scrap utilization enterprises adjusted aluminum scrap quotes down by about 200 yuan/mt following the futures decline. After the market opened on Monday the 13th, prices were adjusted back in some regions such as Hubei, Anhui, and Hunan. Price difference between A00 aluminum and aluminum scrap: The price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai narrowed by 180 yuan/mt WoW to 2,062 yuan/mt, while the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan narrowed by 72 yuan/mt WoW to 2,100 yuan/mt. Divergent views emerged regarding the subsequent trend of aluminum scrap prices. Some participants in the secondary aluminum industry believe that after the National Day holiday, aluminum scrap prices will maintain a strong, fluctuating pattern. The fundamental tight supply of aluminum scrap is difficult to alleviate in the short term, providing strong support for prices. In October, aluminum scrap prices are expected to be guided higher, influenced 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 for high-priced raw materials and a mentality to drive down prices, which will restrain the upside for prices. Based on SMM's comprehensive assessment, the overall aluminum scrap market prices in October are still expected to hold up well. The mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) is forecast to hover around 17,500-18,000 yuan/mt. The market needs to closely monitor the sustainability of post-holiday downstream demand and further guidance from primary aluminum price trends.

Secondary Aluminum Alloy:Futures: On Monday, the most-traded cast aluminum alloy futures contract 2512 showed a fluctuating trend. It opened at 20,340 yuan/mt, reached a high of 20,630 yuan/mt, touched a low of 19,605 yuan/mt, and finally settled at 20,410 yuan/mt, forming a bearish candlestick with a long lower shadow. It fell by 130 yuan/mt or 0.63% compared to the previous trading day. Open interest was 12,927 lots, and trading volume was 4,788 lots. Intraday activity was primarily characterized by bears increasing positions, but there was support at lower levels. Spot market: On Monday, the SMM A00 aluminum price fell by 180 yuan/mt from the previous day to 20,800 yuan/mt, and the SMM ADC12 price dropped by 100 yuan/mt to 21,000 yuan/mt. Affected by escalating tariff conflicts, aluminum prices experienced a significant correction, leading to a decline in aluminum scrap prices and a slight loosening on the cost side. Most participants in the secondary aluminum market lowered prices by 100 yuan/mt, while some enterprises, due to optimistic expectations for the future market or being impacted by low raw material and finished product inventories, chose to hold prices steady and adopt a wait-and-see approach. Overall, the raw material side maintains an undersupply situation, and enterprises still face significant cost pressure. Simultaneously, demand is stable with a positive trend, providing support for prices. However, continuously rising social inventory is exerting some downward pressure on prices. ADC12 prices are expected to maintain a fluctuating trend in the short term. Subsequent focus should be on raw material supply conditions, changes in social inventory, and the pace of post-holiday demand recovery.

Aluminum Market Summary:Macro front: 2026 FOMC voter and Philadelphia Fed President Paulson hinted that she favors two more 25-basis-point interest rate cuts this year, as monetary policy should be formulated ignoring the impact of tariffs on consumer price increases. (Bullish ★) Domestically, China's special harbor dues on US vessels officially took effect today. The General Office of the Ministry of Transport issued the "Implementation Measures for Collecting Special Port Dues on U.S. Vessels," which states that vessels engaged in international maritime transport, calling at Chinese ports, and meeting one of the following conditions shall pay special port dues by the shipowner or their agent. (Bearish ★) Fundamentals: After entering October, some aluminum enterprises in the north reported that, driven by peak season demand for downstream processed materials, the proportion of liquid aluminum direct supply is expected to increase. This will directly keep aluminum ingot production at low levels, reducing the supply of spot aluminum ingots in the market, thereby providing support to aluminum prices from the supply side. Inventory side, according to SMM data, domestic aluminum ingot social inventory was approximately 650,000 mt on October 13: up 58,000 mt MoM from September 29, and up 33,000 mt from September 25. From a seasonal perspective, there has been no excessive seasonal inventory buildup this year, with inventory remaining at low levels for the same period. Downstream consumption shows resilient peak season performance, with spot discounts limited. Against the backdrop of seasonal peak demand, even as aluminum prices rose to a high of 21,000 yuan/mt, the discount in the spot market did not deepen significantly (the spot-futures price spread did not widen noticeably), further confirming demand's supportive effect on prices. In summary: Short-term, last Friday Trump threatened to impose 100% tariffs on China, causing SHFE aluminum to break below support levels in the night session. However, Vance signaled negotiations for easing tensions, partially alleviating market concerns. Fundamentals provide underlying support: northern aluminum enterprises are increasing the proportion of liquid aluminum direct supply, keeping aluminum ingot production low and supply tight; inventory is at low levels for the period with no excessive seasonal buildup, and downstream peak season demand resilience is evident, with limited spot discounts confirming consumption's price floor effect. Current aluminum prices remain at a relatively high level. High prices will gradually suppress downstream procurement pace, and 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. The aluminum market is expected to hover at highs, with subsequent focus on changes in China-U.S. trade relations and aluminum ingot inventory trends.

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