CPI Rebound Coupled with Inventory Drawdown, Aluminum Prices Hold Up Well in the Short Term [SMM Aluminum Morning Meeting Minutes]

SMM Aluminum Morning Meeting Minutes, 10.16

Futures:According to the night session data on Oct. 15, technical analysis showed that the SHFE aluminum 2511 contract fluctuated rangebound during the Oct. 15 night session, closing slightly up 0.05% at 20,885 yuan/mt. Moving averages indicated the price was below the 5-day MA (20,904) but above the 10-day (20,853), 30-day (20,806), and 60-day MAs (20,699), suggesting short-term pressure but a still bullish medium and long-term trend; trading volume fell to 22,933 lots, below the 5-day, 10-day, and 20-day averages, reflecting low market participation and strong wait-and-see sentiment; the MACD indicator was positive (DIF: 49.20, DEA: 46.28), but the histogram was relatively small, indicating weak momentum. Resistance is seen near the recent high range of 20,900-21,000, support near 20,800-20,850, with key support around the 60-day MA at 20,699. Overall, the night session saw limited volatility, with no clear directional breakout technically.

Primary Aluminum Market:SHFE aluminum retreated after a rapid rise in the morning session, trading broadly in the range of 20,850-20,930 yuan/mt. In east China, recent aluminum ingot arrivals were relatively small, with continued destocking, leading to slightly tight spot supply. Suppliers refused to budge on prices and were reluctant to sell, coupled with large buyers entering to purchase, narrowing spot discounts. Actual transactions were at a premium of about 10-20 yuan/mt against the SMM average price. The east China market selling sentiment index was 3.21 on Wednesday, up 0.14 WoW; the buying sentiment index was 3.18, up 0.25 WoW. SMM A00 aluminum was quoted at 20,920 yuan/mt on Wednesday, up 20 yuan/mt from the previous trading day, at a premium of about 30 yuan/mt against the 2510 contract and a discount of 20 yuan/mt against the 2511 contract, up 20 yuan/mt from the previous day. In central China, downstream purchasing enthusiasm improved slightly. Before the market open, trading sentiment was relatively sluggish, with actual transactions mainly at a discount of 10-20 yuan/mt against the SMM average price. Later, purchasing increased, and some traders began stockpiling, improving the actual premiums and discounts to around parity to a discount of 10 yuan/mt against the SMM average price. The central China market selling sentiment index was 2.73 on Wednesday, up 0.01 WoW; the buying sentiment index was 2.58, up 0.01 WoW. SMM central China A00 was recorded at 20,850 yuan/mt, up 10 yuan/mt from the previous trading day, at a discount of 40 yuan/mt against the October contract and a discount of 90 yuan/mt against the November contract, up 10 yuan/mt from the previous day. The Henan-Shanghai price spread narrowed by 10 yuan/mt WoW to -70 yuan/mt.

Recycled Aluminum Raw Materials:Spot primary aluminum prices rose slightly on Wednesday compared to the previous trading day, with SMM A00 spot aluminum closing at 20,920 yuan/mt, while aluminum scrap market prices held flat overall. With the traditional peak season half over, tight supply remains the main theme in the scrap market, keeping procurement prices high, though the sustainability of these high levels remains to be seen. On Wednesday, baled UBC aluminum scrap was quoted in a concentrated range of 15,850–16,350 yuan/mt (excluding tax), while shredded aluminum tense scrap (priced based on aluminum content) was quoted in a concentrated range of 17,300–17,800 yuan/mt (excluding tax). Prices for baled UBC, shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, and mechanical casting aluminum scrap remained flat WoW. 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 trend, as the tight supply fundamentals are unlikely to ease in the short term, providing solid support for prices. In October, aluminum scrap prices are expected to be guided higher by primary aluminum prices. However, other feedback suggests that downstream demand remains stable with a positive trend, but scrap utilization enterprises' acceptance of high-priced raw materials and their inclination to drive down prices persist, which may curb the upside potential for prices. Based on SMM's comprehensive assessment, the overall aluminum scrap market in October is 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 trends.

Secondary Aluminum Alloy: On Wednesday, aluminum prices continued to rebound, while secondary aluminum alloy enterprises showed divergent quotations—some raised prices by 100 yuan/mt due to cost pressures, while others held steady and adopted a wait-and-see approach. Currently, raw material supply remains tight, and cost pressures on enterprises persist. Demand remains stable with a positive trend, supporting price resilience, but inventory pressure is constraining the upward momentum. In the short term, ADC12 prices are expected to maintain a fluctuating trend. The pace of improvement in raw material supply, changes in social inventory, and the recovery rhythm of post-holiday demand will be key factors influencing price trends.

Aluminum Market Summary: Macro Front: Data released by the National Bureau of Statistics (NBS) showed that China's CPI rose 0.1% MoM in September, fell 0.3% YoY, while the core CPI increased 1% YoY, marking the fifth consecutive month of expansion and the first time in nearly 19 months that the growth rate returned to 1%. (Bullish ★) The U.S. stated that whether to impose 100% tariffs on China depends on China's actions. In response, China's Ministry of Foreign Affairs remarked that the U.S. is simultaneously seeking dialogue while threatening to impose hefty tariffs and introduce new restrictions, which is not the right way to engage with China. China urged the U.S. to correct its wrong practices as soon as possible and resolve issues through dialogue and consultation. Regarding the EU's intention to force Chinese companies to transfer technology to European firms, China opposes protectionist and discriminatory practices under the guise of enhancing competitiveness. (Neutral ★) Fundamentals: After entering October, some aluminum enterprises in northern China 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 the supply of spot aluminum ingots in the market and providing supply-side support for aluminum prices. Inventory side, according to SMM data, domestic aluminum ingot social inventory was approximately 627,000 mt as of October 16. On a weekly basis, it decreased by 23,000 mt from October 13. From a seasonal perspective, no significant seasonal inventory buildup occurred this year, with inventory remaining at low levels for the same period. Downstream consumption shows robust resilience during the peak season, and spot discounts are limited. Against the backdrop of seasonal peak demand, even with aluminum prices rising to a high of 21,000 yuan/mt, the discount in the spot market is not substantial (the spot-futures price spread did not widen significantly), further confirming demand's supportive effect on prices. Comprehensive Outlook: Macro front, China's core CPI growth expanded to 1% in September, returning to 1% for the first time in nearly 19 months, indicating a mild recovery in domestic demand, which is positive for aluminum prices; however, uncertainties arise from Sino-US trade friction and EU technical disputes. Fundamentals side, in October, northern aluminum enterprises increased the proportion of direct liquid aluminum supply, keeping aluminum ingot production at low levels and tightening supply; SMM data shows inventory decreased by 23,000 mt WoW to 627,000 mt, remaining at historically low levels for the period, with downstream peak season consumption showing resilience and spot discounts limited, confirming demand's support for prices. Overall, driven by tight supply, inventory drawdown, and peak season demand, aluminum prices are expected to hold up well in the short term, but vigilance is needed against potential disruptions to market sentiment from macro risks.

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