Macro front, internationally, CME data showed an 83.4% probability of the US Fed implementing two interest rate cuts by late October. The OECD's interim economic outlook report released on the 23rd projected global economic growth at 3.2% for 2025, up 0.3 percentage points from the forecast in June. In early October, Trump's remarks about significantly raising tariffs on Chinese goods entering the US sparked market risk-off sentiment. Subsequent potential meetings between Chinese and US leaders at the APEC summit warrant continued monitoring. Domestically, data released by the National Bureau of Statistics (NBS) showed China's CPI rose 0.1% MoM but fell 0.3% YoY in September. Core CPI increased 1% YoY, marking the fifth consecutive month of expanding growth and the first time in nearly 19 months that the growth rate returned to 1%. China's manufacturing PMI for September was announced at 49.8, but it continued to rebound MoM. During the month, eight ministries issued the "Work Plan for Stabilizing Growth in the Nonferrous Metals Industry (2025-2026)", aiming to maintain a positive economic trend with an average annual production growth of around 1.5% for ten nonferrous metals. On October 9, the People's Bank of China conducted reverse repo operations again. The US stated that whether to impose 100% tariffs on China depends on China's actions. The Chinese Foreign Ministry responded that the US, while seeking talks, simultaneously threatens and intimidates with hefty tariffs and new restrictive measures, which is not the right way to engage with China. It urged the US to correct its wrong practices as soon as possible and resolve issues through dialogue and consultation. Regarding the EU's intention to force Chinese enterprises to transfer technology to European companies, China opposes protectionist and discriminatory practices under the guise of enhancing competitiveness.
Fundamentals side, in October, the commissioning of replacement projects and production resumptions from technological transformation projects are expected to bring further growth in aluminum ingot production, with daily average production projected to rise further. Regarding the proportion of liquid aluminum, the peak season continued into October with a slight recovery. The proportion of local alloying of aluminum liquid at some enterprises is expected to increase further, projected to rise 1 percentage point MoM to 77.3% in October. Cost side, spot alumina prices remained in the doldrums, and the real-time cost for aluminum continued to decline MoM, down approximately 118 yuan/mt WoW to 16,151 yuan/mt as of last Thursday. The immediate theoretical profit for aluminum increased 108 yuan/mt MoM to 4,798 yuan/mt. Demand side, in the first week after the holiday, demand for construction materials and other industrial materials showed no significant change yet. Demand for PV frames declined. This week, China's aluminum extrusion operating rate recorded 53.5%, down 0.1 percentage point WoW. Operating performances in other downstream sectors remained stable. Inventory side, according to SMM statistics, domestic mainstream consumption area aluminum ingot inventory recorded 627,000 mt this Thursday, a destocking of 23,000 mt from this Monday and a destocking of 22,000 mt WoW from last Thursday. SMM expects China's aluminum ingot inventory to resume a destocking trend overall in the second half of October. Recently, a comprehensive indefinite strike broke out at the Guinea Kindia Bauxite Company (CBK), bringing production and transportation activities to a complete halt. It is preliminarily estimated that the impact on China's bauxite supply will be limited in the medium to long term, but the short-term impact on relevant prices still requires further evaluation.
Overall, internationally, expectations for US Fed interest rate cuts improved. However, in early October, Trump reiterated tariff hike remarks, boosting market risk-off sentiment. Subsequently, news indicated a willingness "to negotiate rationally with China," requiring continued monitoring of related developments. Domestically, the positive macro atmosphere supports market confidence, with keen anticipation for more substantive measures in H2 to boost consumption and economic growth. Fundamentally, as the traditional peak season progresses further in October, the proportion of liquid aluminum is expected to increase further. Although cost support continues to weaken, demand-side performance remains stable. Inventory-wise, according to SMM statistics, domestic electrolytic aluminum ingot inventory in major consumption areas recorded 627,000 mt this Thursday, a decrease of 23,000 mt from this Monday and down 22,000 mt WoW. SMM expects China's aluminum ingot inventory to resume a destocking trend overall in the second half of October. Comprehensively, optimistic domestic and overseas macro fronts, coupled with overall steady fundamental performance, are expected to keep aluminum prices holding up well. SHFE aluminum is forecast to trade within the range of 20,700-21,300 yuan/mt next week, while LME aluminum is expected to trade between $2,720-2,800/mt. However, the disturbances from tariff wars and overseas mine incidents on aluminum prices should not be underestimated. SMM will continue to monitor the latest developments on the macro and fundamental fronts.
