Tightening fundamentals and inventory drawdown to boost aluminum prices in the short term [SMM Aluminum Morning Meeting Minutes]

SMM Aluminum Morning Meeting Minutes, 10.21

Futures:During the night session on October 20, the most-traded SHFE aluminum contract opened at 20,900 yuan/mt, reached a highest price of 20,935 yuan/mt and a lowest price of 20,830 yuan/mt, and finally closed at 20,920 yuan/mt, down 0.09%. The night session generally showed a trend of fluctuating upward, with the price rising from around 20,860 yuan/mt to near 20,920 yuan/mt. From a technical perspective, the night session's trading volume shrank, reflecting strong wait-and-see sentiment in the market; insufficient volume constrained the rebound momentum. If the volume continues to shrink, it might test the support level. On the MACD 60-minute candlestick level, the green bars contracted but a golden cross has not yet formed, indicating an unclear short-term direction. Considering the recent high and low points (the monthly low around 20,600, the high around 21,200), the resistance level is expected to be in the range of 21,280-21,480, and the support level is expected to be in the range of 20,530-20,750.

Macro Front:Data released by the National Bureau of Statistics (NBS) on the 20th showed that, according to preliminary calculations, China's GDP for the first three quarters was 101.5036 trillion yuan, a year-on-year increase of 5.2% calculated at constant prices; for the third quarter, China's GDP was 35.45 trillion yuan, a year-on-year increase of 4.8% calculated at constant prices. (Bullish ★) On the local time of October 20, US President Trump and Australian Prime Minister Albanese signed an agreement to strengthen cooperation between the two countries in the fields of critical minerals and rare earths. The White House stated that the two countries will invest over $3 billion in critical mineral projects within the next six months; the US Department of Defense will help fund the construction of a high-end gallium refinery with an annual output of 100 metric tons in Western Australia; Australia will purchase underwater drones and Apache helicopters from the US. (Neutral ★)

Fundamentals:Inventory: The daily inventory of aluminum ingots in mainstream consumption areas on Monday was recorded at 46.55, down 3,000 mt WoW; aluminum billet inventory was recorded at 106,000 mt, with an inventory buildup of 4,000 mt WoW. Cost: The average cost in the aluminum industry on Monday was recorded at 16,119 yuan/mt, down 25 yuan/mt WoW, mainly affected by the decline in alumina prices; the industry's average profit expanded by 6 yuan/mt to 4,811 yuan/mt. Imports and Exports: According to data from the General Administration of Customs, China's net imports of primary aluminum in September 2025 were 217,900 mt, up 13.6% MoM and 73.4% YoY. The cumulative net imports of primary aluminum from January to September were approximately 1.7802 million mt, up 13.0% YoY. In October, the loss margin for primary aluminum imports remained around 2,200-2,600 yuan/mt. With primary aluminum imports continuing to incur significant losses, import supply is expected to mainly consist of long-term contracts and processing handbooks, and net imports are expected to remain at around 200,000 mt per month.

Primary Aluminum Market:Yesterday, SHFE aluminum retreated after a rapid rise in the morning session, with the price center mainly hovering around 20,920 yuan/mt. In east China, high aluminum prices and aluminum ingot destocking were in a tug-of-war. During the first trading session, actual transactions were around parity to a premium of 10 yuan/mt against the SMM average price. Later, buying sentiment weakened, with actual transactions at a discount of 10 yuan/mt to parity against the SMM average price. This Monday, the selling sentiment index in the east China market was 3.23, down 0.06 WoW; the purchasing sentiment index was 3.18, down 0.03 WoW. This Monday, SMM A00 aluminum closed at 20,930 yuan/mt, down 20 yuan/mt from the previous trading day, at a premium of about 10 yuan/mt against the 2511 contract, up 10 yuan/mt from the previous trading day. In central China, downstream purchasing sentiment improved slightly, but restocking was still mainly for rigid demand. The actual transaction premium/discount narrowed from a discount of about 30 yuan/mt against the SMM average price last week to around a discount of 10 yuan/mt. This Monday, the selling sentiment index in the central China market was 2.64, up 0.01 WoW; the purchasing sentiment index was 2.50, up 0.09 WoW. SMM central China A00 was recorded at 20,810 yuan/mt, down 30 yuan/mt from the previous trading day, at a discount of 110 yuan/mt against the November contract, flat from the previous trading day. The price spread between Henan and Shanghai decreased by 10 yuan/mt WoW to -120 yuan/mt.

Recycled Aluminum Raw Materials:Yesterday, spot primary aluminum prices dropped back slightly compared to the previous trading day, with SMM A00 spot closing at 20,930 yuan/mt, while aluminum scrap market prices overall held flat. With the traditional peak season more than 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. This Monday, baled UBC scrap was concentratedly quoted at 15,900-16,500 yuan/mt (ex-tax), shredded aluminum tense scrap (priced based on aluminum content) was concentratedly quoted at 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 were flat WoW. Procurement difficulties for aluminum tense scrap in Hubei became prominent, with shredded aluminum tense scrap and mechanical casting aluminum scrap rising by 100 yuan/mt in a single day. The aluminum scrap market is expected to hold up well this week, with the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) operating around 17,500-18,000 yuan/mt. The tight supply pattern for raw materials is difficult to change in the short term, coupled with strong support for SHFE aluminum in the 20,800-20,850 yuan/mt range. If it breaks through the 21,000 yuan/mt mark, it will further transmit positive effects. On the other hand, uncertainty from Trump's tariff threats, the lackluster "September-October peak season" downstream, limited acceptance of high-priced raw materials by scrap utilization enterprises, and inventory pressure on finished products at downstream scrap utilization enterprises will all curb procurement enthusiasm. The market needs to focus on whether primary aluminum prices can stabilize at high levels, the restocking pace of secondary aluminum enterprises after the holiday, and the sustainability of end-use demand.

Secondary Aluminum Alloy:This Monday, SMM A00 aluminum was quoted at 20,930 yuan/mt, down 20 yuan/mt from the previous day, while SMM ADC12 prices remained stable at 21,050 yuan/mt, lacking momentum for price adjustments. Currently, the tight supply pattern of aluminum scrap is difficult to change in the short term, keeping cost support firm. Some enterprises, constrained by material shortages or losses, have seen a decline in operating rates. Meanwhile, demand resilience and low plant inventories support prices, but caution is needed against the suppression of upside room from high social inventory and warrant pressure, while also paying attention to the impact of policy implementation on the supply side. ADC12 prices are expected to hold up well in the short term, with key focus on raw material circulation, the pace of demand recovery, and inventory changes.

Aluminum Market Summary:Overall, the macro front leans toward a favorable atmosphere, but with a new round of Sino-US economic and trade consultations approaching, follow-up related news needs continuous monitoring. The domestic macro environment is positive, supporting market confidence. On the fundamentals side, supply side, operating aluminum capacity remains flat; demand side, as the traditional peak season progresses further in October, the proportion of liquid aluminum is gradually increasing, with overall demand performance remaining stable. Cost support has weakened, as alumina prices continue to fall, leading to a further overall decline in aluminum costs. In terms of inventory, national aluminum ingot inventory saw destocking of 2,000 mt WoW on Monday, and it is expected that domestic aluminum ingot inventory will enter a destocking trend in the second half of October. Overall, the domestic and overseas macro front is leaning optimistic, coupled with steady fundamental performance, keeping aluminum prices holding up well.

[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 as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]