US September Inflation Data Falls Short of Expectations, Macro Environment Improves, Aluminum Prices Remain Strong [SMM Aluminum Morning Meeting Minutes]

SMM Aluminum Morning Meeting Minutes 10.27

Futures:During the night session on October 24, the most-traded SHFE aluminum contract opened at 21,150 yuan/mt, reached a highest price of 21,250 yuan/mt and a lowest price of 21,120 yuan/mt, and finally closed at 21,245 yuan/mt, up 0.09%. The night session showed a fluctuating upward trend, with the trading center rising to around 21,170 yuan/mt. Technically, the MA moving averages continued their bullish alignment (MA5: 21,201 > MA10: 21,081.50 > MA20: 21,009.25 > MA60: 20,900.63), and the MACD 4-hour candlestick showed expanding red bars, maintaining a golden cross (DIFF: 94.04, DEA: 65.59). Trend-wise, SHFE aluminum remains in an upward channel. Considering recent highs and lows (low around 20,640, high around 21,310), resistance is expected in the 21,350-21,550 range, with support in the 20,650-20,850 range.

Macro Front:On Friday local time (October 24), the latest data released by the US Bureau of Labor Statistics showed that September inflation data came in lower than expectations across the board. The data indicated that the US Consumer Price Index (CPI) rose 0.3% MoM in September, lower than the 0.4% recorded in August this year and market expectations (Bullish ★). According to CCTV News, from October 25 to 26 local time, China and the US held economic and trade consultations in Kuala Lumpur. After the consultations, China's International Trade Negotiator and Vice Minister of Commerce Li Chenggang told Chinese and foreign media reporters that the two sides reached preliminary consensus on properly resolving several important economic and trade issues of mutual concern, and the next step will involve fulfilling their respective domestic approval procedures (Bullish ★).

Fundamentals:Inventory side, according to SMM statistics, primary aluminum ingot inventory in major domestic consumption areas recorded 625,000 mt today, an increase of 8,000 mt WoW from last Thursday, but a decrease of 1,000 mt WoW from last Monday. Supply side, domestic operating aluminum capacity remained flat, while overseas supply is expected to decline, potentially providing support to overseas aluminum prices. Demand side, some downstream enterprises reported a decrease in orders on hand in October, suggesting limited room for further demand growth, but overall demand performance remained stable in the short term. Cost support weakened, as aluminum costs continued to decline affected by falling alumina prices.

Primary Aluminum Market:Yesterday, SHFE aluminum mainly fluctuated downward in the early session, but the overall trading center moved higher again. In East China, the high absolute price encouraged holders to sell, but downstream plants were weak in purchasing, leading to weaker transactions. Actual transactions were at a discount of 10-30 yuan/mt against the SMM average price. Last Friday, the selling sentiment index in the East China market was 2.86, down 0.16 WoW; the purchasing sentiment index was 2.89, down 0.09 WoW. Last Friday, SMM A00 aluminum closed at 21,110 yuan/mt, up 70 yuan/mt from the previous trading day, at a discount of about 30 yuan/mt against the 2511 contract, down 20 yuan/mt from the previous trading day. In central China, purchasing was limited at the opening last Friday, and sellers offered at lower prices to clear stocks. Later in the session, traders with capital anticipated a wider discount and engaged in stockpiling, reducing circulating inventory, while hedging sentiment for purchases strengthened. Prices rallied from a discount of 30 yuan/mt to a premium of 20 yuan/mt, with transactions mainly concluded around parity. Last Friday, the selling sentiment index in the central China market was 2.86, up 0.04 WoW; the purchasing sentiment index was 2.91, up 0.21 WoW. SMM A00 aluminum in central China was recorded at 20,990 yuan/mt, up 80 yuan/mt from the previous trading day, at a discount of 150 yuan/mt against the November contract, down 10 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -120 yuan/mt, up 10 yuan/mt from the previous trading day.

Recycled Aluminum Raw Materials:Last Friday, spot primary aluminum prices rose from the previous trading day, breaking through the 21,000 yuan/mt level, with SMM A00 spot aluminum closing at 21,110 yuan/mt, while aluminum scrap prices increased overall. As the traditional peak season approaches its end, tight supply remains the main theme in the aluminum scrap market, keeping procurement prices elevated, though the sustainability of high levels remains uncertain. Last Friday, baled UBC was mainly offered at 15,950-16,550 yuan/mt (ex-tax), shredded aluminum tense scrap (priced based on aluminum content) was mainly offered at 17,300-17,800 yuan/mt (ex-tax). Baled UBC rose 50 yuan/mt WoW, while shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, and mechanical casting aluminum scrap increased 100 yuan/mt WoW. 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) hovering around 17,500-18,000 yuan/mt. If primary aluminum prices stabilize above the 21,000 yuan/mt level, it will further transmit positive effects, supporting aluminum scrap prices, while the tight supply pattern is unlikely to change in the short term. Demand side, demand resilience remains in sectors such as NEVs and PV, but the end of the traditional peak season and high social inventory pressure may curb procurement enthusiasm. Close attention should be paid to the restocking pace of secondary aluminum enterprises after the holiday and the sustainability of end-use demand. If primary aluminum prices retreat after a rapid rise or downstream demand falls short of expectations, the aluminum scrap market may face pullback pressure. Overall, the market will continue the tug-of-war between sellers and buyers, requiring close monitoring of primary aluminum trends and policy developments.

Secondary Aluminum Alloy:Last Friday, SMM A00 aluminum was quoted at 21,110 yuan/mt, up 70 yuan/mt from the previous day, while SMM ADC12 prices held steady at 21,200 yuan/mt. Currently, aluminum scrap supply remains tight, and procurement costs climbed further during the week. To ensure order fulfillment, enterprises generally procured at high prices, with low-priced sources scarce. Overall demand remains resilient, coupled with low finished product inventories at manufacturers and ongoing order delivery pressure, providing some support to market prices. In the short term, supported by rigid costs and a tight supply-demand balance, ADC12 aluminum alloy ingot prices are expected to hold up well. Subsequent attention should focus on raw material supply, consumption performance, and inventory changes.

Aluminum Market Summary:Overall, the macro front is favorable, with US September inflation data coming in below expectations across the board, strengthening prospects for a US Fed interest rate cut. Domestically, the positive macro environment supports market confidence. On the fundamentals side, overseas supply is expected to tighten, while domestic supply remains stable. Overall aluminum supply and demand are projected to tighten, coupled with a destocking trend in domestic aluminum ingot inventory. In the short term, aluminum prices are expected to maintain a firm tone.

[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 to replace independent judgment. Any decisions made by clients are unrelated to SMM.]