Aluminium prices drift higher as September peak season operations recover amid low inventory

Futures: The most-traded SHFE aluminium contract opened at RMB 24,400 per tonne in the night session on September 7, reached a high of RMB 24,470 per tonne and a low of RMB 24,335 per tonne, and closed at RMB 24,450 per tonne, up 30 from the previous close, a gain of 0.12 per cent. Prices traded above the 5/10/20/40/60-period moving averages, with short, medium, and long-term moving averages diverging upward in a bullish alignment, forming stepped support. Trading volume contracted notably during the session, and open interest fell slightly, driven mainly by bear position reductions.

On the technical front, the 4-hour MACD golden cross extended, with the red histogram maintained and bullish momentum continuing. On September 7, LME aluminium opened at USD 3,291 per tonne, reached a high of USD 3,320.5 per tonne and a low of USD 3,282 per tonne, and closed at USD 3,312.5 per tonne, up 0.50 per cent from the previous close. It drifted higher during the day, with prices rising again and closing above the short-term moving averages. Open interest pulled back slightly that day, driven mainly by bear position reductions. On the technical front, the daily MACD red histogram extended, with bullish momentum maintained.

Macro front: On September 7, the Ministry of Industry and Information Technology and the State Administration for Market Regulation jointly issued the Notice on Promoting Standardised Supplier Payment and Optimised Payment Term Management for Automakers, the first national-level payment term management document for an industry sector and a key measure for industrial ecosystem development.

According to CME's "FedWatch": the probability of the US Fed keeping rates unchanged in September is 39.6 per cent, and the probability of a cumulative 25 basis point hike is 60.4 per cent. The probability of the US Fed keeping rates unchanged through October is 29.1 per cent, the probability of a cumulative 25 basis point hike is 54.9 per cent, and the probability of a cumulative 50 basis point hike is 16.1 per cent.

Fundamentals: Entering the traditional peak season in September, earlier disruptions have gradually been cleared, and operating rates across sectors have broadly seen restorative growth. Last week, the operating rate of primary aluminium alloy producers rebounded 1.2 per cent to 59.0 per cent, the operating rate of aluminium plate/sheet and strip producers rebounded 0.2 percentage points to 69.4 per cent, the operating rate of aluminium wire and cable producers rebounded 1 per cent to 64.0 per cent, the operating rate of aluminium extrusion producers rebounded to 51.1 per cent, the operating rate of aluminium foil producers rebounded 0.4 percentage points to 71.1 per cent, and the operating rate of secondary aluminium producers rebounded to 51.6 per cent.

On the inventory front, according to SMM statistics, China's aluminium ingot warehouse withdrawals totalled 110,500 tonnes during August 31-September 6, down 200 tonnes from the previous week; China's aluminium billet warehouse withdrawals totalled 36,100 tonnes during August 31-September 6, down 5,300 tonnes from the previous week.

Primary aluminium market: Today, SHFE aluminium futures were basically unchanged from the previous trading day, with the price centre gradually rising in the morning session, while spot market transaction prices showed signs of weakening under pressure. However, weekend destocking was relatively strong. Quotes were largely firm at market open, with early spot transactions concentrated at a premium of RMB 20 per tonne against the SHFE aluminium 2609 contract.

Today, mainstream A00 aluminium ingot transactions ranged from parity to a premium of 40 yuan/tonnes. Aluminium futures rallied again in the night session. In the central China market, pre-market quotes were relatively low, and traders tended to restock aggressively at deep discounts. With Friday approaching, downstream processing enterprises showed some recovery in purchasing and stockpiling sentiment, and overall market trading sentiment improved, driving quotes gradually higher. Ultimately, actual transaction prices in the central China market centred around a discount of RMB 110-150 per tonne against the SHFE aluminium 09 contract.

On the inventory side, aluminium ingot inventory in major consumption regions fell 7,500 tonnes M-o-M today, with all three regions showing destocking. Aluminium prices edged up today, and the spot market stabilized after earlier weakness. With absolute prices staying high, some suppliers briefly attempted to hold prices firm but then shifted to actively lowering quotes to stimulate sales and monetise inventory.

However, limited arrivals from the north kept inventory from increasing for now, while the spot-futures price spread quickly weakened back to its previous platform level. These two factors prompted other suppliers to firmly hold prices and hold back from selling, gradually tightening spot supply. Downstream buyers passively purchased as needed amid high prices. With no immediate risk of surging premiums, traders shifted from cautious, limited buying to increasing market participation to absorb discounted cargoes, and transactions showed an improving trend.

Aluminium scrap: Yesterday, SMM A00 aluminium closed at 24,410 yuan/tonnes, up 50 yuan/tonnes from the previous trading day. Aluminium scrap market prices were largely stable overall, with slight increases. A substantive recovery in end-use demand still needs to be observed. Inventory digestion for wrought aluminium alloy scrap still requires time, and scrap utilization enterprises are likely to continue purchasing as needed and maintaining low-inventory operating strategies, with the pace of price increases expected to remain slow.

This week, the aluminium scrap market is expected to consolidate on a strong note with a slight upward shift in the price centre, with close attention needed on the pace of downstream order recovery.

Secondary aluminium alloy:Spot market: Today, the ADC12 market was largely stable with a wait-and-see tone. SMM ADC12 prices held steady at 24,300 yuan/tonnes from the previous day. On the cost side, aluminium prices and aluminium scrap raw material prices fluctuated relatively mildly today, lacking a clear driver for further price changes.

On the demand side, the traditional peak season is gradually beginning. Although end-use demand has recovered somewhat from the off-season, the recovery remains mild, and order growth is not enough to generate a clear industry-wide improvement. With both cost and demand drivers relatively weak, enterprises generally showed limited willingness to adjust prices, and market sentiment was largely stable.

Short-term prices are expected to maintain a stable-to-strong pattern. Going forward, attention should remain on changes in aluminium prices and aluminium scrap costs, as well as whether end-use demand can further release during the September peak season.

Comprehensive outlook: US nonfarm payrolls significantly exceeded expectations, and expectations for US Fed interest rate hikes rose again. Expectations of macro tightening remain subject to repeated disturbances, creating periodic pressure on aluminium price gains. Domestically, low aluminium ingot inventory persists, with inventory maintaining a destocking trend.

The spot market provides strong support for aluminium prices and remains the dominant factor in the current market. The demand side has entered the traditional September peak season, with processing enterprises seeing a recovery in operating rates, but a full recovery in end-user orders still requires time, and the actual fulfilment of the peak season remains to be observed.

Meanwhile, aluminium billet inventory continues to build up, posing a potential risk of transmission to the aluminium ingot side. The supply of aluminium outside China continues to recover, further constraining the upside room for aluminium prices. From the futures perspective, SHFE aluminium shows a strong technical pattern but with weakening upward momentum at the margin, and insufficient trading volume limits the strength of an upward breakout, with SHFE and LME trends diverging. In the short term, aluminium prices are expected to consolidate on a strong note.

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.