US Fed Interest Rate Cut Implemented, Aluminum Prices Fluctuate at Highs as Constraints Emerge [SMM Aluminum Morning Meeting Minutes]

October 30 SMM Aluminum Morning Meeting Minutes

Futures:During the night session on October 29, the most-traded SHFE aluminum contract opened at 21,290 yuan/mt, reached a high of 21,360 yuan/mt and a low of 21,245 yuan/mt, and finally closed at 21,315 yuan/mt, up 0.09%, fluctuating at highs with the center continuing to move upward. Technically, the MA averages maintained a bullish alignment (MA5: 21,250.00 > MA10: 21,251.00 > MA20: 21,115.75 > MA60: 20,938.58), and the MACD 4-hour candlestick showed some change in the red column, maintaining a golden cross (DIFF: 104.77, DEA: 93.45). In terms of trend, SHFE aluminum remains in an upward channel. Based on recent highs and lows (low around 20,640, high around 21,365), resistance is expected in the 21,350–21,550 range, and support in the 20,650–20,850 range.

Macro Front:A Foreign Ministry spokesperson announced that, following consultations between China and the US, President Xi Jinping will meet with US President Trump in Busan, South Korea, on October 30 local time to exchange views on China-US relations and issues of mutual interest. (Bullish ★) The US Fed announced a 25-basis-point cut in the benchmark interest rate to 3.75%–4.00%, marking the second consecutive meeting with an interest rate cut, in line with market expectations. The Fed also announced it will end balance sheet reduction on December 1. (Bullish ★)

Fundamentals:Inventory side, according to SMM statistics, domestic mainstream consumption area aluminum ingot inventory recorded 619,000 mt, destocking 7,000 mt from Monday this week, but inventory buildup 1,000 mt from last Thursday. Cost side, based on SMM Wednesday data, the average aluminum industry cost was 16,043 yuan/mt, down 49 yuan/mt WoW; the average industry profit simultaneously expanded by 239 yuan/mt, to 5,127 yuan/mt. Supply side, domestic operating aluminum capacity remained flat, while overseas supply is expected to decline, potentially supporting overseas aluminum prices; demand side, some downstream enterprises reported a decrease in orders on hand in October, with limited room for further demand growth, but overall demand performance remained stable in the short term.

Primary Aluminum Market:Yesterday, SHFE aluminum mainly fluctuated downward in the early session, with the center pulling back to around 21,190 yuan/mt. In east China, high absolute prices led downstream purchases to focus on rigid demand, while holders refused to budge on prices and showed poor willingness to sell at a discount. Large buyers entered the market to purchase on price dips, with actual transactions at a premium of around 10 yuan/mt against the SMM average price. This Wednesday, the east China market selling sentiment index was 2.92, up 0.06 WoW; the purchasing sentiment index was 2.87, up 0.05 WoW. This Wednesday, SMM A00 aluminum was quoted at 21,170 yuan/mt, up 10 yuan/mt from the previous trading day, at a discount of around 30 yuan/mt against the 2511 contract, up 10 yuan/mt from the previous trading day. In central China, aluminum prices pulled back at the opening yesterday, and traders' buying sentiment rebounded. However, as aluminum prices fluctuated at highs, the trading market cooled down. Traders holding goods showed low willingness to sell at a discount, refusing to budge on prices and holding back sales. Eventually, market transaction prices hovered around parity with the central China price. On Wednesday, the selling sentiment index in the central China market was 2.87, down 0.01 WoW; the buying sentiment index was 2.81, down 0.03 WoW. SMM A00 aluminum in central China closed at 21,040 yuan/mt, up 10 yuan/mt from the previous trading day, at a discount of 160 yuan/mt against the November contract, up 10 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -130 yuan/mt, flat from the previous trading day.

Recycled Aluminum Raw Materials:Yesterday, spot primary aluminum prices edged up compared to the previous trading day. SMM A00 spot aluminum closed at 21,170 yuan/mt, while aluminum scrap prices generally held steady. As the traditional peak season approaches its end, tight supply remains the main theme in the aluminum scrap market, keeping procurement prices high, though the sustainability of these highs remains to be seen. Yesterday, baled UBC was quoted in the range of 16,000–16,500 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was quoted in the range of 17,600–18,100 yuan/mt (ex-tax). Baled UBC prices held steady WoW, while shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, and mechanical casting aluminum scrap prices rose by 100 yuan/mt WoW. Due to improved demand from downstream alloys, shredded aluminum tense scrap prices followed the upward trend. Jiangxi, Hubei, Foshan, Anhui, Hunan, and other regions collectively raised quotations for aluminum tense scrap series, with increases ranging from 100 to 200 yuan. In terms of the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai widened by 10 yuan/mt WoW to 2,432 yuan/mt, while the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan narrowed by 107 yuan/mt WoW to 2,207 yuan/mt. 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. As primary aluminum prices stabilize above the 21,000 yuan/mt threshold, further positive momentum will be transmitted, supporting aluminum scrap prices. The tight supply situation is unlikely to change in the short term. Demand side, resilience remains in sectors such as NEVs and PV, but the end of the traditional peak season and high social inventory pressure may dampen procurement enthusiasm. Close attention should be paid to the post-holiday restocking pace of secondary aluminum enterprises 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 downward pressure. Overall, the market will continue to experience a tug-of-war between sellers and buyers, requiring close monitoring of primary aluminum trends and policy developments.

Secondary Aluminum Alloy:On Wednesday, SMM A00 aluminum was quoted at 21,170 yuan/mt, up 10 yuan/mt from the previous day, while SMM ADC12 prices held steady at 21,200 yuan/mt. The tight supply situation for aluminum scrap persists, and procurement costs continue to climb. To ensure order fulfillment, enterprises generally procure at high prices, with low-priced sources being scarce. Affected by factors such as insufficient raw material circulation, high-priced raw materials eroding profits, and unclear policies in Jiangxi and Anhui, industry supply has contracted. Overall demand remains resilient, coupled with low finished product inventories at manufacturers and ongoing pressure for order deliveries, providing some support to market prices. In the short term, driven by rigid cost support 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:Current macro tailwinds are prominent: China-U.S. trade consultations have released positive signals, boosting market expectations for trade easing; the 15th Five-Year Plan focuses on cultivating strategic emerging industries, and domestic growth-stabilizing policies continue to exert force, supporting market confidence. However, while the US Fed cut interest rates by 25 basis points as expected in the October meeting, Powell's remarks were noticeably hawkish, hinting that a December rate cut is not a certainty. Combined with unresolved structural differences in China-U.S. trade, this may constrain market volatility. On the fundamentals side, overseas supply is expected to tighten, while domestic supply remains stable. Overall aluminum supply and demand are projected to tighten. On the inventory side, pressured by high aluminum prices and weak downstream demand, domestic aluminum ingot inventories may shift from weak destocking to weak inventory buildup from late October to early November. Cost side, affected by declining alumina prices, support has weakened somewhat. In the short term, amid mixed macro tailwinds and fundamental factors, aluminum prices are expected to fluctuate at highs.

[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make decisions cautiously and not use this to replace independent judgment. Any decisions made by clients are unrelated to SMM.]