SMM Oct 20 Aluminum Morning Meeting Minutes:
Futures: SHFE aluminum settled at 23,415 yuan/mt, up 0.41%, fluctuating between 23,320 and 23,450 throughout the day. Although the price held above the MA5 (23,270), it remained capped by the MA10 (23,382), MA30 (23,952), and MA60 (23,831), with the moving average system maintaining a bearish alignment. The MACD DIF (-212.83) and DEA (-152.21) remained below the zero axis, with the green bar at -121.24, indicating the bearish trend is unchanged and this is a technical oversold recovery. Trading volume shrank sharply to 36,400 lots, open interest declined, and rebound momentum was insufficient. The suggested core trading range for SHFE aluminum is 23,000-23,600. LME aluminum settled at $3,027.5/mt, down slightly by 0.21%, fluctuating between 3,025 and 3,035.5. The price barely held above the MA5 (3,009.2) but remained far below the MA10 (3,035.2), MA30 (3,167.6), and MA60 (3,209.7), with the medium-term downtrend clearly intact. The MACD DIF (-62.1) and DEA (-55.99) maintained a bearish crossover downward, with the green bar persisting and bearish momentum dominating. The suggested core trading range for LME aluminum is 3,000-3,050.
Macro front: Iranian military and diplomatic officials issued intensive warnings of escalating hostilities, directly linking a potential resumption of US bombing operations to global energy supply disruptions. IRGC spokesman Mohammadi stated that if war breaks out, Iran's response will be more severe, and the world will face a serious energy crisis. He stressed that if Iran is not secure, the region will no longer be secure.
Fundamentals: Ex-China, production resumptions and new capacity additions in aluminum continue to advance, and expectations of ample supply in the forward curve persist, weighing on futures sentiment. Although LME aluminum inventory has fallen to a historic low of 238,400 mt, the macro environment remains pressured by expectations of tightening liquidity ex-China. In China, social inventory briefly built up during the National Day holiday before resuming its decline. According to SMM statistics, as of this Monday, China's aluminum ingot social inventory fell by 29,000 mt WoW from last Thursday and by 44,000 mt from last Monday, shifting to destocking after the post-holiday seasonal inventory buildup, confirming consumption resilience. 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, exceeding market expectations and showing continued resilience in export consumption. However, marginal changes warrant caution: the proportion of liquid aluminum in September fell short of expectations, and October is expected to pull back slightly, with casting ingot volume increasing MoM and aluminum ingot supply seeing marginal expansion.
Primary aluminum market: East China market: SHFE aluminum futures were slightly higher intraday compared with the previous trading day, but market participants continued to show strong buying and selling sentiment during the morning session. Spot premiums of SHFE aluminum against futures continued to rise, with intraday transactions at premiums of 280-300 yuan/mt.
Central China market: Yesterday, the spot market in central China saw sluggish trading sentiment. The rebound in aluminum futures, combined with excessively large market premiums and weak stockpiling sentiment on Monday, kept procurement sentiment among downstream processing enterprises subdued. However, suppliers showed significant willingness to sell, with limited inclination to hold prices firm, and market quotes trended lower. Ultimately, actual transaction prices in the central China market centered around premiums of 160-180 yuan/mt against the SHFE aluminum November contract.
South China market: Yesterday, aluminum prices continued to rise, while the spot market remained mired in a slump. The backwardation structure between near-month contracts still showed a huge price spread, and the actual basis likely remained on a high-level downward trajectory. Additionally, the release of inventory from warehouses in the southwest and concentrated arrivals led to notable inventory buildup, with both factors weighing on market sentiment. After a brief attempt to hold prices firm failed, suppliers quickly returned to aggressive price cuts to offload cargo and cash out, with spot circulation at persistent discounts. Rush buying amid continuous price rise and restocking demand from basis pullbacks were both relatively limited, making it difficult to absorb the surplus circulation, and transactions were poor.
Aluminum scrap: On the previous trading day, SMM A00 aluminum closed at 23,650 yuan/mt, up 190 yuan/mt WoW from the prior trading day. Regional quote divergence intensified, with cumulative price adjustments for shredded aluminum tense scrap in Jiangxi, Foshan, and Henan reaching 300 yuan/mt, while Guizhou, Hubei, Hunan, and Anhui remained relatively cautious, raising prices by 100 yuan/mt. On the price difference front: On October 19, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan stood at about 2,132 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap stood at about 522 yuan/mt. Supply side, tax audits in central China continued to deepen, increasing the scarcity of compliant invoiced aluminum scrap, with invoice-holding enterprises showing strong willingness to hold prices firm. Competition among enterprises remained intense, with some only able to issue 20% of their quota, keeping effective supply persistently tight. In the short term, the aluminum scrap market is expected to maintain a firm operating trend, with limited downside. Supply side, the scope and intensity of tax audits remain the core variable, and the tight supply of compliant invoiced cargo is unlikely to ease. Demand side, downstream scrap utilization enterprises are operating at moderate rates during the current peak season, and under the dual-tight supply-demand situation, price support strength is expected to rise further. Additionally, the price difference between A00 aluminum and aluminum scrap has narrowed again to historical lows, weakening the cost advantage of aluminum scrap and bringing the issue of primary aluminum substitution back to the discussion table. Going forward, close attention should be paid to the spread of tax audits, changes in invoicing quotas across regions, and the pace of downstream operations.
Secondary aluminum alloy: On the previous trading day, ADC12 spot quotes moved broadly higher, with SMM ADC12 market quotes up 100 yuan/mt from last Friday to 24,500 yuan/mt. The rebound in futures and primary aluminum prices helped repair market sentiment, and with raw material cost support further strengthening, the market broadly raised quotes by 100 yuan/mt, with the price center rebounding somewhat. However, downstream feedback indicates that end-use demand improvement remains limited, with purchases driven mainly by rigid demand and relatively low acceptance of price increases. Overall, the current ADC12 market shows a pattern where cost support and sentiment recovery are jointly driving price rebounds, while demand follow-through is relatively insufficient. Short-term prices are expected to continue moving sideways, but further upside will depend on aluminum price trends and actual downstream purchasing activity. On the import side, overseas ADC12 offers have pulled back slightly to $3,040–3,120/mt. Boosted by stronger domestic ADC12 prices and RMB appreciation, import break-even has improved and rebounded above the break-even line, with the theoretical import window now open. Going forward, attention should be paid to the impact of overseas offers and exchange rate changes on import cargo inflows.
Comprehensive 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 nonferrous metals valuations. On the fundamental side, overseas production resumptions and new capacity additions continue to pressure short-term futures sentiment. Aluminum prices are expected to consolidate on a subdued note this week.
[The information provided is for reference only. This article does not constitute direct investment 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.]
