SMM Oct 16 Aluminum Morning Meeting Minutes:
Futures: The most-traded SHFE aluminum 2611 contract closed at 23,160 yuan/mt, up 55 yuan from yesterday's settlement price, a gain of 0.24%. It opened at 23,095.00 yuan/mt during the day and fluctuated within a range of 22,965-23,225 yuan/mt. Prices are running below the MA5 (23,254.00), MA10 (23,493.00), MA30 (23,989.00), and MA60 (23,820.00) moving averages. After the sharp decline, prices rebounded slightly from lows, with a weak consolidation and repair structure emerging at low levels, while the moving averages above form key resistance pressure. The MACD DIF (-230.8333) is below the DEA (-117.6617), and the MACD green bar reading is -226.3433, indicating that bearish momentum still dominates. The core trading range for SHFE aluminum is suggested at 22,900-23,400 yuan/mt. The LME aluminum 3M contract closed at $2,990.0/mt, up 0.08%. It opened at $2,991.0/mt during the day and fluctuated within a range of $2,989.5-2,991.0/mt. Prices are running below the MA5 (3,009.6), MA10 (3,053.7), MA30 (3,186.5), and MA60 (3,214.0). Pressured by overseas rate hike expectations, prices dipped and then stabilized slightly, moving sideways at low levels, with medium and long-term moving averages exerting notable resistance. The MACD DIF (-67.9607) is below the DEA (-52.3192), and the MACD green bar is -31.2829, indicating that the bearish trend has not yet reversed. The core trading range for LME aluminum is suggested at $2,900-3,050/mt.
Macro front: Driven by surging energy prices, US September PPI rose 6.3% YoY, far exceeding market expectations of 5.4% and hitting the highest level since December 2022; it rose 1.3% MoM, the largest increase since March 2022. Meanwhile, the New York Fed's October manufacturing sentiment index surged 17.9 points to 25.5, the strongest growth in nearly five years. US September retail sales rose 0.8% MoM, beating market expectations of 0.4%, but multiple core consumer spending items excluding fuel recorded negative growth, indicating that inflationary squeeze effects are spreading. Expectations are rising that the US Fed will continue raising rates in the coming months. Reports indicate that the US military is formulating new strike plans for a possible resumption of large-scale military action against Iran, including the use of the largest non-nuclear bomb in active US service, the "Mother of All Bombs," with targets covering Iran's energy infrastructure and nuclear facilities. Israeli security officials said that Israeli and Western intelligence shows Iran is taking "extreme measures" on the military front, so Israeli Prime Minister Netanyahu spoke by phone with US Secretary of State Rubio to discuss plans for military strikes against Iran.
Fundamentals: Outside China, aluminum production resumptions and new capacity commissioning continue to advance, and expectations of ample supply in the long term persist, weighing on futures sentiment. Although LME aluminum inventory has fallen to a historically low level of 238,400 mt, the macro environment remains pressured by expectations of tightening liquidity outside China. Domestically, social inventory briefly built up during the National Day holiday before resuming its decline. According to SMM statistics, as of October 15, China's social inventory of aluminum ingot stood at 636,000 mt, down 50,000 mt from last Thursday. Aluminum billet inventory came in at 168,000 mt, down 19,000 mt WoW, shifting to destocking after the post-holiday seasonal inventory buildup, confirming resilient consumption. In addition, China exported 656,000 mt of unwrought aluminum and aluminum semis in September, up 4.8% MoM from 626,000 mt in August, beating market expectations and underscoring resilient export consumption. However, marginal changes warrant caution: the proportion of liquid aluminum in September fell short of expectations and is expected to pull back slightly in October, with casting ingot volume up MoM, pointing to marginal supply loosening in the aluminum ingot market. Aluminum billet processing fees were previously low, prompting production cuts at some enterprises. This week, processing fees have shown signs of recovery (on October 15, processing fees for Φ90 aluminum billet in Wuxi stood at 540 yuan/mt, up about 130 yuan/mt from pre-holiday levels), easing pressure for production cuts at the margin.
Primary aluminum market: In east China, SHFE aluminum prices continued to fall yesterday, with the nearby-month BACK spread fluctuating between 160-200 yuan/mt, and spot trading sentiment was positive. The center of spot transaction prices continued to move higher from the previous trading day. Spot prices against the SHFE aluminum 2611 contract were at a premium of 270-290 yuan/mt. In central China, the far-month spread on SHFE aluminum futures continued to widen yesterday. Suppliers in central China showed an increasingly strong willingness to sell quickly and clear their inventories, with little inclination to hold prices firm. Downstream processing enterprises, constrained by the tail end of the peak season, saw terminal order demand consistently fall short of expectations, maintaining just-in-time small-volume procurement. Market quotes continued to trend lower. Ultimately, actual transaction prices in central China were concentrated in the range of a premium of 150-170 yuan/mt against the SHFE aluminum November contract. In south China, aluminum prices plunged yesterday, yet the spot market remained notably weak. As futures fell sharply, the backwardation structure expanded aggressively once again: nearby-month basis consolidated on a weak note, while far-month basis rose instead of falling, both staying at elevated levels. Selling pressure to monetize inventories intensified, with some previously profitable inventories dumped at low prices, disrupting the market. Mainstream quotes ranged from a large discount to parity, with spot circulation persistently at a discount. Fear of high prices intensified further, with almost no willingness to enter the market. Relatively stable procurement alone could not absorb the surplus circulating supply, leaving transactions somewhat subdued. Spot transaction prices were concentrated at a premium of 290-330 yuan/mt against the SHFE aluminum 2611 contract.
Aluminum scrap: Yesterday, SMM A00 aluminum closed at 23,260 yuan/mt, down sharply by 360 yuan/mt from the previous trading day. The price difference between A00 aluminum and aluminum scrap narrowed significantly: on October 15, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan stood at about 2,155 yuan/mt, narrowing 337 yuan/mt from last Thursday; the price difference between A00 aluminum and shredded aluminum tense scrap stood at about 711 yuan/mt, narrowing 615 yuan/mt WoW. Supply side, the tax inspection in central China continues to deepen, with compliant invoiced aluminum scrap becoming increasingly scarce and invoice-holding enterprises showing strong willingness to hold prices firm. Competition among enterprises is intense, with some only able to issue 20% of their quota, keeping effective supply persistently tight. On the import front, this week imported shredded zorba prices at Ningbo Port and Tianjin Port were recorded at 20,970 yuan/mt (tax inclusive) and 21,020 yuan/mt (tax inclusive), respectively, down 100 yuan/mt WoW. In the short term, the aluminum scrap market is expected to hold up well, with limited downside. Supply side, the scope and intensity of tax inspections remain the core variable, and the tightness in compliant invoiced cargo is unlikely to ease. Demand side, downstream scrap utilization enterprises are operating at moderate rates during the peak season, and with both supply and demand tight, price support is likely to strengthen further. In addition, the price difference between A00 aluminum and aluminum scrap has narrowed again to a historical low, weakening the cost advantage of aluminum scrap and bringing the issue of primary aluminum substitution back to the table. Going forward, focus on the spread of tax inspections, changes in invoicing quotas across regions, and the pace of downstream operations.
Secondary aluminum alloy:Futures: Yesterday, the most-traded AD2612 cast aluminum alloy futures contract opened at 22,705 yuan/mt, briefly touched 22,730 yuan/mt in early trading before pulling back under resistance, then stepped down to the 22,600 yuan/mt level. During the session, it dipped to 22,520 yuan/mt on heavier volume, marking a fresh stage low, before stabilizing and rebounding. It closed the morning at 22,640 yuan/mt, down 410 yuan/mt or 1.78% from yesterday's settlement price of 23,050 yuan/mt. In the afternoon, watch whether it can reclaim the 22,700 yuan/mt level and the sustainability of the decline on rising open interest. Spot: Yesterday, ADC12 market quotes weakened overall, with the SMM ADC12 price falling 200 yuan/mt from the previous day to 24,300 yuan/mt. Aluminum prices and futures pulled back notably, intensifying bearish sentiment in the market and putting spot prices under pressure. In the short term, ADC12 prices remain under dual pressure from weakening costs and sluggish demand, with some downward pressure. However, the decline in aluminum scrap raw material prices may be relatively limited, and with cost support from tight compliant raw material supply, the downside for spot prices is constrained. Going forward, watch aluminum price trends, changes in aluminum scrap costs, and the recovery of downstream orders.
Overall outlook:On the macro front, rising expectations for US Fed interest rate hikes, a strong US dollar, and high US Treasury yields continue to weigh on base metals valuations. On the fundamental side, production resumptions and new capacity outside China continue to pressure short-term futures sentiment. Aluminum prices are expected to consolidate on a subdued note in the near term.
[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make decisions prudently and not use this as a substitute for independent judgment. Any decisions made by clients are not related to SMM.]
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