Accelerated destocking of aluminium ingots during the peak season supports aluminium prices to hold up well in the short term

Futures: Yesterday, SHFE aluminium closed at RMB 24,235 per tonne, up 0.75 per cent hitting a new recent high of 24,290 during the session. The price is well above all key moving averages (MA5=24,080, MA10=23,925, MA30=23,820, MA60=23,572), with the moving average system in a bullish divergence and a strong medium-term uptrend intact.

The MACD indicator shows DIF=120.51 and DEA=97.52, with the histogram expanding to 45.99, indicating sustained strengthening of bullish momentum. Trading volume expanded to 91,100 lots, with market participation rebounding notably. The suggested core trading range for SHFE aluminium is 24,000-24,600. LME aluminium closed at USD 3,288.5 per tonne, down slightly by 0.18 per cent with intraday fluctuations around 3,271.5-3,290.

The price is above all key moving averages (MA5=3,244.3, MA10=3,243.55, MA30=3,237.1, MA60=3,230.63), with the moving average system in a bullish alignment. The MACD indicator shows DIF=9.64 and DEA=4.52, with the histogram expanding to 10.24, indicating sustained strengthening of bullish momentum. The suggested core trading range for LME aluminium is 3,250-3,320.

Macro front: US President Trump said the new round of strikes against Iran will not last long; he is prepared to launch another attack on Iran. Iranian Parliament Speaker Qalibaf said the US must fulfil its relevant commitments before Iran will take action to reopen the Strait of Hormuz.

The US Fed's Beige Book showed that US economic activity grew mildly since early July. Of the 12 Fed districts, 10 reported slight to moderate growth, while 2 reported no change. Enterprises generally expect a positive economic outlook ahead, but remain attentive to uncertainties arising from energy prices, policies, and international conflicts.

Fundamentals: In markets outside China, overseas aluminium production resumptions and new capacity continued to ramp up as planned and damaged capacity in the Middle East is gradually recovering. Market expectations persist that the global aluminium market will shift from tight to loose in the longer term, continuing to cap the upside room for aluminium prices. However, LME visible inventory remains at a historically low level of around 250,000 tonnes, providing bottom support for LME aluminium.

In the Chinese market, on the inventory side, China's aluminium social inventory continued its destocking trend this week. As of this Thursday, China's aluminium ingot social inventory fell by 22,000 tonnes W-o-W to 815,000 tonnes, and was down 37,000 tonnes from last Thursday, providing strong support for aluminium prices.

Primary aluminium market: SHFE aluminium futures fluctuated more sharply today than at the same time yesterday, but the price centre was basically flat. Bullish sentiment persists in the spot market, with spot premiums for A00 aluminium ingot continuing to rise and trading activity moderate. Morning deals were mainly done at parity to a premium of RMB 20 per tonnes.

Note: This article has been issued by SMM and has been published by AL Circle with its original information without any modifications or edits to the core subject/data. 

Trading sentiment in the central China market remained sluggish today, but improved slightly W-o-W. September orders at downstream processing enterprises rebounded somewhat, lifting raw material purchasing sentiment modestly. Suppliers grew increasingly inclined to hold prices firm, and market quotes stopped trending lower.

Ultimately, actual transaction prices in the central China market centred around a discount of RMB 110-130 per tonnes against the SHFE aluminium 09 contract. Aluminium prices edged up today, and the spot market staged a sharp rebound. Inventory continued to destock and remained at low levels. In early trading, most suppliers still leaned bearish on the outlook and actively lowered quotes to secure cash first, with some even resorting to sell-offs.

However, north-to-south arrivals lacked scale in the short term, traders showed intent to restock and gradually absorbed discounted cargoes, and downstream users had rigid buying demand. Spot circulation tightened quickly, and key large buyers once again raised prices aggressively to purchase, generating a notable ripple effect. Suppliers subsequently returned to holding prices firm and holding back from selling, with quotes gradually raised and actual transactions at even higher levels. Overall transactions were satisfactory.

Aluminium scrap: Today, SMM A00 spot aluminium closed at RMB 24,080 per tonne, down RMB 30 per tonne from the previous trading day. Domestic aluminium scrap prices were broadly stable. On the price spread front, as of September 2, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan stood at about RMB 2,322 per tonne, while the price difference between A00 aluminium and shredded aluminium tense scrap stood at about 1,157 yuan/tonnes, both stable W-o-W.

With primary aluminium prices continuing to rebound, aluminium scrap fluctuations remained relatively limited, and the price transmission mechanism was hindered, mainly constrained by two factors: first, the traditional peak season is about to arrive, but downstream secondary aluminium alloy demand has yet to show clear improvement; second, inventory of wrought aluminium alloy scrap such as doors and windows in Henan and other regions remains high, weakening the upside elasticity of aluminium scrap prices.

In addition, the "reverse invoicing" policy constraint on the supply side persists, and the scarcity of compliant invoiced aluminium scrap provides bottom support for aluminium scrap prices. In the short term, the market is at the tail end of the traditional off-season, and orders at downstream scrap utilisation enterprises have yet to show a clear recovery.

The front-loading effect of the peak season is not significant, and scrap utilisation enterprises continue to purchase as needed and maintain low inventory strategies, showing limited acceptance of higher prices. Some enterprises opted to hold off and observe after earlier price-following moves. On the import side, previously traded cargoes have been arriving at ports, providing some supply replenishment, but the deeper effects of the UAE ban and EU tariff hikes will continue to limit the volume of premium scrap imports.

Secondary aluminium alloy: Spot market: ADC12 market quotes remained broadly stable today. On one hand, aluminium prices and futures have been relatively steady, with no notable changes on the cost side, providing little further impetus for spot prices. On the other hand, while end-use demand has improved slightly from earlier levels, the peak season has yet to clearly kick in, and the sustainability of the improvement in market purchasing remains to be seen.

Against this backdrop, most enterprises are temporarily holding prices steady and taking a wait-and-see approach. Some enterprises hold a cautiously optimistic attitude toward the market outlook, but no widespread price hike actions have yet formed. Short-term prices are expected to continue to consolidate on a strong note, with focus on subsequent aluminium price trends and the release of end-use demand.

Comprehensive outlook: On the macro front, the Jackson Hole central bank symposium sent hawkish signals, and Fed Chairman Warsh's debut remarks leaned hawkish. Expectations for a September rate hike have heated up again, and global liquidity expectations have tightened, weighing on macro sentiment and exerting bearish pressure on aluminium prices. However, China's continued destocking and the ongoing "September peak season" are providing strong support below aluminium prices. With bullish and bearish factors intertwined, aluminium prices are expected to continue to consolidate at highs.