September peak season destocking supports aluminum prices, macro risks still warrant vigilance [SMM Aluminum Morning Meeting Summary]

9.9 SMM Aluminum Morning Meeting Minutes

Futures: The most-traded SHFE aluminum contract opened at 24,470 yuan/mt in the night session on September 8, reached a high of 24,660 yuan/mt and a low of 24,420 yuan/mt, and closed at 24,645 yuan/mt, up 185 yuan/mt or 0.76% from the previous close. Futures rose sharply, with moving averages in a bullish alignment and prices trading above all major moving averages. Trading volume slipped slightly during the session, while open interest edged up, driven mainly by bullish positioning. On the technical front, the 4-hour MACD golden cross continued, with the red histogram extending further and bullish momentum strengthening. On September 8, LME aluminum opened at $3,314.0/mt, reached a high of $3,358.5/mt and a low of $3,308.5/mt, and closed at $3,334.0/mt, up $21.5/mt or 0.65% from the previous close. Prices consolidated higher intraday, pushing further up and closing firmly above all short-term moving averages. Trading volume expanded notably on the day, while open interest pulled back slightly, driven mainly by bearish position reductions. On the technical front, the daily MACD red histogram extended and expanded, with bullish momentum strengthening further.

Macro front: Analyst Robert Howard said the US August CPI data may determine whether the US Fed leans toward hiking rates or holding steady at next week's rate decision, and will influence the US dollar's trajectory. According to the median estimate from a Reuters survey, headline CPI is expected to rise 0.4% MoM and 3.4% YoY, while core CPI is expected to rise 0.2% MoM and 2.4% YoY. The market is currently balancing two forces: strong US economic data supporting rate hikes, and geopolitical uncertainty that continues to attract safe-haven demand. Focus now shifts to US PPI and CPI data due later this week. According to CME FedWatch, the probability of the US Fed holding rates unchanged in September is 40.6%, while the probability of a cumulative 25bp hike is 59.4%. The probability of the US Fed holding rates unchanged through October is 29.8%, with a 54.4% probability of a cumulative 25bp hike and a 15.8% probability of a cumulative 50bp hike.

Fundamentals: General Administration of Customs data showed that unwrought aluminum and aluminum semis exports in August 2026 totaled 626,000 mt, up 17.2% YoY from 534,000 mt in the same period last year, but down 2.6% MoM from 643,000 mt in July, a decrease of 17,000 mt. Cumulative exports in the first eight months reached 4.665 million mt, up 16.8% from 3.995 million mt in the same period last year. On the inventory front, aluminum ingot inventory in major consuming regions fell 7,500 mt WoW on Tuesday, with destocking seen across all three regions. In the spot market, as aluminum futures rallied again and downstream processing enterprises, constrained by lackluster peak-season demand, focused on reducing finished product and raw material inventories and scaled back purchases, trading sentiment in central China was sluggish, though large traders showed notable willingness to hold prices firm.

Primary aluminum market: The SHFE aluminum 2609 contract rose significantly in futures trading compared with the same period of the previous trading day. Despite inventory destocking, selling sentiment in the market was quite evident today, and spot premiums in transactions fell compared with yesterday. SMM A00 aluminum ingot spot transactions were basically on par with to a premium of 10 yuan/mt. Aluminum futures rallied again in the night session. In the central China market, pre-market trading quotes were relatively low. Traders tended to restock heavily at large discounts when prices dipped, and with Friday approaching, downstream processing enterprises showed recovering sentiment in purchasing and stockpiling. Overall market trading sentiment recovered, driving quotes to gradually move higher. Ultimately, actual transaction prices in the central China market centered around a discount of 110-150 yuan/mt against the SHFE aluminum 09 contract. Today, aluminum prices continued to edge up, while the spot market was weak. The spot-futures price spread showed expectations of further weakening and has returned to the starting point of the previous round. In the morning, suppliers still intended to slow the pace of selling and were in no rush to adjust prices. However, higher absolute prices stimulated unilateral cash-out selling with proactive downward adjustments, exerting pressure. Meanwhile, the reappearance of inventory buildup also brought expectations of incoming supply. Ultimately, suppliers generally returned to lowering prices for shipments, with more discounted cargo circulating in the market. Downstream just-in-time procurement showed resilience and did not weaken to the point of sluggishness. Traders continued to gradually increase market participation to take on discounted cargo, with moderate demand, and transactions improved marginally.

Aluminum scrap: Yesterday, SMM A00 aluminum closed at 24,410 yuan/mt, up slightly by 50 yuan/mt from the previous trading day. Aluminum scrap market prices remained generally stable with slight increases. A substantive recovery in end-use demand still needs to be observed. Inventory digestion of wrought aluminum alloy scrap still requires time. Scrap utilization enterprises are likely to continue purchasing as needed and maintain low-inventory operating strategies, with the pace of following price increases expected to remain slow. This week, the aluminum scrap market is expected to consolidate on a strong note with the price center moving slightly higher. Close attention should be paid to the pace of downstream order recovery. Today, SMM A00 aluminum closed at 24,460 yuan/mt, up slightly by another 50 yuan/mt from the previous trading day. Aluminum scrap market prices remained generally stable with slight follow-through increases. Regarding price differences, on September 8, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,541 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 1,320 yuan/mt, widening further WoW. On the import side, the impact of the UAE export ban and the EU tariff hike continued. The contraction in supply from Europe and the Middle East remained unchanged. High-quality scrap with invoices remained generally tight, and room for import growth was limited. A substantive recovery in end-use demand still needs to be observed. Inventory digestion of wrought aluminum alloy scrap still requires time. Scrap utilization enterprises are likely to continue purchasing as needed and maintain low-inventory operating strategies, with the pace of following price increases expected to remain slow. Next week, the aluminum scrap market is expected to consolidate on a strong note with the price center moving slightly higher. The mainstream operating range for shredded aluminum tense scrap (priced based on aluminum content) is expected to center around 20,300-21,000 yuan/mt. Close attention should be paid to the pace of downstream order recovery.

Secondary aluminum alloy: Spot: Today, ADC12 market quotes were generally stable with a slight upward bias, with the SMM ADC12 price rising by 50 yuan/mt from the previous day to 24,350 yuan/mt. Driven by higher aluminum prices and raw material costs, some enterprises raised their quotes by 100 yuan/mt; however, given that the recovery in end-use demand remains insufficient, some enterprises chose to hold prices steady and wait, leaving overall market pricing cautious. As the traditional peak season gradually advances, some downstream orders have improved from earlier levels, with initial signs of marginal demand recovery emerging, though the overall extent of improvement remains limited. In the short term, ADC12 prices are likely to continue consolidating on a strong note, with the upside room still depending on how fully peak-season demand materializes and on the sustainability of cost support.

Overall outlook: US nonfarm payrolls far exceeded expectations, pushing expectations for US Fed interest rate hikes higher again. Repeated disturbances in expectations for macro tightening are creating periodic pressure on aluminum price gains. China's low inventory of aluminum ingots persists, with destocking continuing, and the spot market is providing strong support for aluminum prices, remaining the dominant factor in the current market. On the demand side, the market has entered the traditional September peak season, and operating rates at processing enterprises are recovering, but a full recovery in end-user orders still needs time, and the actual extent of peak-season fulfillment remains to be seen. Meanwhile, aluminum billet inventories continue to build, posing a potential risk of transmission to aluminum ingots. The recovery in aluminum supply outside China continues, further limiting the upside room for aluminum prices. From a futures perspective, SHFE aluminum's technical pattern is strong but upward momentum is weakening at the margin, and insufficient trading volume is constraining the strength of any upside breakout, with SHFE and LME trends diverging. In the short term, aluminum prices are expected to consolidate on a strong note.

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