Aluminium prices gain phased support as China-US presidential meeting approaches and destocking accelerates

SHFE aluminium closed at RMB 24,195 per tonne last night, down 0.45 per cent. The price broke below MA5 (24,445) and MA10 (24,262.5), but remained above MA30 (24,083) and MA60 (23,700), with moving averages showing short-term bearish pressure and mid-term bullish support. The MACD indicator showed DIF at 105.8 and DEA at 131.0, with a death cross at high levels and the green bars expanding to -50.36, indicating strengthening short-term bearish momentum.

Trading volume was 64,700 lots, below the MA5 average volume, reflecting cautious market participation. The core trading range for SHFE aluminium is suggested at 24,000-24,600. LME aluminium closed at USD 3,274.5 per tonne, edging up 0.35 per cent.

The price was slightly below MA5 (3,280.7) and MA10 (3,279.1), but remained above MA30 (3,269.3) and MA60 (3,222.2), with the mid-term trend intact. The MACD indicator showed DIF at 7.48 and DEA at 10.64, with a death cross above the zero axis and green bars expanding to -6.32, indicating weak short-term momentum. The core trading range for LME aluminium is suggested at 3,250-3,320.

Macro front: At the invitation of US President Trump, President Xi Jinping will pay a state visit to the US from September 23 to 25. During the visit, President Xi will have in-depth exchanges of views with President Trump on major issues concerning China-US relations as well as world peace and development.

This will be President Xi's first visit to the US in three years and his first state visit to the US in 11 years, and it will also mark reciprocal visits by the two heads of state within half a year. On September 20 local time, Chinese lead person for China-US economic and trade affairs and Vice Premier He Lifeng held economic and trade consultations with US lead persons Treasury Secretary Bessent and Trade Representative Greer in New York.

Fundamentals: On the supply side, China's weekly aluminium production remained stable last week, while some downstream sectors saw certain production cuts, reducing liquid aluminium purchases and lowering the proportion of liquid aluminium by 0.02 percentage points. Outside China, according to foreign media reports, Alba's operating capacity recovered to around 1.3 million tonnes, further lifting operating capacity outside China. On the demand side, with the upcoming holiday, downstream stocking sentiment improved slightly.

On the inventory side, aluminium ingot shipments from Xinjiang were disrupted, and combined with downstream stockpiling, aluminium ingot destocking widened this week. As of this Monday, China's social inventory of aluminium ingots fell by 12,000 tonnes from last Thursday and by 55,000 tonnes from last Monday. In the short term, the destocking trend for aluminium is expected to continue.

Primary aluminium market: On Monday, the SHFE aluminium 2610 contract showed no significant change from the previous trading day, and spot trading was lacklustre. Most suppliers indicated reluctance to hold excessive inventory ahead of the holiday, and the spot trading centre shifted lower on Monday. SMM A00 aluminium ingot spot premiums were transacted between parity and a premium of RMB 20 per tonne. On Monday, SHFE aluminium futures moved sideways in a narrow range, and trading sentiment in the central China market remained sluggish.

At the start of the week, downstream processing enterprises showed insufficient restocking willingness, and having already made substantial purchases at earlier low prices, they drove current market quotes continuously lower.

With the holiday approaching, suppliers preferred to reduce inventory and showed weak willingness to hold prices firm, with only some large players maintaining high premiums. Ultimately, the actual transaction price range in the central China market centred around a discount of RMB 70-100 per tonne against the SHFE aluminium October contract. SMM daily aluminium ingot inventory data across the three regions increased by 1,000 tonnes, with only the Gongyi area showing destocking.

South China market: On Monday, aluminium prices edged lower, and the spot market showed a weak but stable adjustment. Weekend arrivals increased and inventory accumulated slightly, but the growth was mainly from imported aluminium, while domestic supply remained relatively scarce, providing limited improvement to spot circulation.

Suppliers, especially traders above designated scale, regained the willingness to hold prices firm, with quotes mostly remaining steady and only a few slightly lowered. Discounted transactions were actually limited, and supply circulation was tight. On the purchasing side, both downstream buyers and traders showed increased willingness to replenish, shifting from earlier wait-and-see price pushing to actively buying non-premium cargoes, with overall transactions improving. Spot transaction prices were concentrated at premiums of RMB 210-250 per tonne against the SHFE aluminium 2610 contract.

Aluminium scrap: On Monday, SMM A00 aluminium closed at RMB 24,320 per tonne, down RMB 60 per tonne from the previous trading day. Aluminium scrap market prices followed slightly lower, with some regional varieties holding steady amid wait-and-see sentiment. Regarding price differences, on September 21, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was approximately RMB 2,572 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was approximately RMB 1,351 per tonne.

On the supply side, the tight raw material supply pattern remained unchanged, and the scarcity of compliant, invoiced aluminium scrap continued to rise. Notably, tax inspections in the central China region continued to intensify, and the sharp decline in regional aluminium scrap supply will cause significant disruption to aluminium scrap circulation.

On the demand side, the cast aluminium alloy "September peak season" fell short of expectations, with demand yet to show substantial volume growth. Terminal orders improved only slightly compared with the off-season, without forming concentrated restocking. Demand for wrought aluminium alloy was moderate, and in-factory aluminium scrap inventory was relatively ample. Aluminium scrap market prices are expected to continue consolidating on a strong note. On the supply side, the impact of tax inspections continues to spread.

If aluminium scrap yards slow down shipments, circulating supply will tighten again, and aluminium scrap prices are expected to receive strong support. Going forward, close attention will remain on the chain reactions of tax inspections across the aluminium scrap industry chain and changes in orders at scrap utilisation enterprises.

Secondary aluminium alloy: Spot market: On Monday, ADC12 market prices were generally stable, with SMM ADC12 prices holding steady at RMB 24,500 per tonne from the previous trading day. Neither costs nor demand showed significant changes, and market sentiment remained largely wait-and-see. Cost side, aluminium scrap raw material prices showed limited overall fluctuations on Monday.

However, as tax invoice policy enforcement tightened in multiple regions, compliance procurement requirements for enterprises increased, making invoiced aluminium scrap supply relatively tight. Some enterprises' comprehensive raw material procurement costs remained high, with limited downside in the short term.

Demand side, market procurement remained primarily need-based, with limited release of peak-season demand. Short-term prices are expected to consolidate on a strong note, and future price trends will require close attention to tax invoice policy enforcement progress, changes in aluminium scrap raw material supply, and downstream stockpiling ahead of the dual holidays.

Comprehensive outlook: Macro front, the Chinese and US heads of state are about to meet, and Chinese and US economic and trade lead persons held consultations in New York, raising expectations for easing China-US relations.

Fundamentals, production resumptions in the Middle East continued to accelerate, but some new projects were delayed, and the pace of operating capacity increases is expected to slow down in the coming months. With the short holiday approaching, downstream stocking demand supports destocking, and short-term aluminium prices are expected to consolidate at highs.

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.