9.28 SMM Aluminum Morning Meeting Minutes
Futures: The most-traded SHFE aluminum contract did not trade during the night session of September 24 and the daytime session of September 25. On September 24, the daytime session opened at 24,230 yuan/mt, reached a high of 24,265 yuan/mt and a low of 24,175 yuan/mt, and closed at 24,200 yuan/mt, down 30 yuan/mt or 0.12% from the previous close. Futures consolidated at highs before pulling back, with prices falling below the 5-day moving average while remaining above the 20/40/60-period moving averages. Medium and long-term moving averages maintained an upward pattern. Trading volume during the session was 98,900 lots, and open interest stood at 281,000 lots, down 8,300 lots, driven mainly by bulls closing positions. On the technical front, a death cross formed on the 4-hour MACD, with DIFF crossing below DEA and green bars continuing to expand, indicating some release of short-term bearish momentum. On September 25, LME aluminum 3M opened at $3,250.0/mt, reached a high of $3,280.0/mt and a low of $3,245.5/mt, and closed at $3,277.5/mt, up $26.0/mt or 0.80% from the previous close. Futures rebounded from lows, with moving averages across various periods intertwined and prices consolidating within the moving average range. Open interest for the day stood at 577,000 lots, down 644 lots, driven mainly by bears reducing positions. On the technical front, the daily MACD maintained a death cross, with DIFF below DEA and green bars narrowing slightly, indicating that bearish momentum continued to weaken marginally.
Macro front: University of Michigan survey data showed that US consumers' assessments of their current and future one-year personal financial conditions both declined by about 10%, with concerns over high prices continuing to intensify. A gauge of US Treasury volatility is heading for its biggest gain in more than a year, after bond yields climbed to multi-decade highs and jolted the market out of its recent slump. The ICE BofA MOVE index, a measure of bond market volatility, has risen about 29.69% this week, the largest increase since the so-called "Liberation Day" in April last year.
Fundamentals: Last week, the operating rate at leading aluminum downstream processing enterprises in China came in at 62.1%, up 0.2 percentage points WoW. With the Mid-Autumn Festival and National Day holidays approaching, pre-holiday stockpiling advanced in an orderly manner, and operating rates across sectors remained generally stable. Pre-holiday stockpiling supported overall stability in industry operations, but peak-season demand fell short of expectations, and cost and raw material pressures persisted. In the short term, sectors are expected to operate steadily, with possible phased adjustments after the holidays. As of this Monday, China's social inventory of aluminum ingots fell by 4,000 mt from last Thursday and by 47,000 mt from last Monday. In the short term, the destocking trend for aluminum is expected to continue.
Primary aluminum market: On the last trading day before the Mid-Autumn Festival, trading sentiment in the central China spot market remained sluggish. Downstream processing enterprises showed limited enthusiasm for pre-holiday stockpiling and tended to purchase directly from aluminum smelters. Traders holding cargo showed low willingness to hold positions over the holiday, with no significant inclination to hold prices firm, and market quotes continued to decline. Ultimately, actual transaction prices in the central China market centered around a discount of 30-70 yuan/mt against the SHFE aluminum 2610 contract. Last Thursday, the SHFE aluminum 2610 contract showed little change from the previous day, with the market maintaining active purchasing sentiment as downstream buyers stocked up. Upstream sellers and traders also traded actively, with overall spot transaction levels higher than the previous day. SMM A00 aluminum ingot prices stood at a premium of 20-40 yuan/mt.
South China market: Last Thursday, aluminum prices edged down, and the spot market weakened. Inventory continued to destock, and combined with expectations of a narrowing spot-futures price spread, the market initially held prices firm and slowed sales at the start of trading. However, with month-end approaching, the need to liquidate before the holiday remained the dominant factor, and holding prices firm was largely intended to leave room for subsequent downward adjustments. On the demand side, phased stockpiling was largely complete, and the procurement pace slowed. Combined with a cautious stance on spot-futures price spread trends, willingness to take positions beyond rigid demand was limited, lacking incremental support. Ultimately, spot circulation shifted to oversupply, with quotes continuously lowered and transactions mostly at discounts, resulting in relatively poor trading. Spot transaction prices were concentrated at a premium of 250-290 yuan/mt against the SHFE aluminum 2610 contract.
Aluminum scrap: Last Thursday, SMM A00 aluminum closed at 24,240 yuan/mt, flat MoM from the previous trading day, with the aluminum scrap market also stable. In terms of price differences, on September 24, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was approximately 2,482 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was approximately 1,261 yuan/mt. On the import side, August aluminum scrap imports totaled 142,000 mt, up 18.60% MoM but down 17.67% YoY, ending the four consecutive monthly declines since April. Cumulative imports from January to August were approximately 1.243 million mt, down about 7.5% YoY. The MoM recovery in August was mainly driven by the resumption of shipping schedules and replenishment from Southeast Asian sources. In terms of supply, tax audits in Henan, Hunan, and other regions continued to intensify and expand, with compliant invoiced aluminum scrap becoming increasingly scarce and prices receiving strong support. Meanwhile, non-invoiced cargo saw narrowing sales channels under compliance pressure, forcing some traders to cut prices to sell, with prices remaining under downward pressure. On the demand side, the September peak season for cast aluminum alloy fell short of expectations, with demand yet to see substantial volume growth. Demand for wrought aluminum alloy was moderate, and in-factory aluminum scrap inventory was relatively ample. Next week, the aluminum scrap market is expected to consolidate on a strong note, with mainstream trading for shredded aluminum tense scrap (priced based on aluminum content) expected to center around 20,500-21,200 yuan/mt. Close attention should be paid to the scope of tax audit expansion and downstream stocking ahead of the National Day holiday.
Secondary aluminum alloy: Spot market: Last Thursday, ADC12 market quotes remained stable, with enterprises generally showing weak willingness to adjust prices. On one hand, prices of aluminum scrap raw materials fluctuated within a limited range overall, but against the backdrop of stricter tax invoice policies and higher compliant procurement requirements, some enterprises' raw material procurement costs remained at relatively high levels, with the cost side providing certain support to prices. On the other hand, downstream stocking demand before the Mid-Autumn Festival was released to a limited extent, with the demand side providing insufficient upward momentum for prices. Overall, industry prices showed strong resilience under cost support, and the short-term consolidation on a strong note is expected to continue. Going forward, close attention should be paid to the progress of tax invoice policy implementation, changes in aluminum scrap raw material supply, futures trends, and downstream stocking conditions before the dual holidays.
Comprehensive outlook: On the macro front, the US Fed's hawkish rate hike cycle restart, a strong US dollar, and high US Treasury yields continued to weigh on nonferrous metals valuations. On the fundamental front, although domestic inventories remained at low levels and destocking continued, the rebound in casting ingot volumes combined with aluminum billet production cuts led to weaker demand for liquid aluminum. Coupled with open interest adjustment pressure before the National Day holiday, the tug-of-war between longs and shorts intensified, and aluminum prices are expected to consolidate with adjustments as the main theme.
[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions prudently and should not use this as a substitute for their own independent judgment. Any decisions made by clients have nothing to do with SMM.]
