Ex-China operating capacity rises, aluminium prices continue to consolidate at highs

SHFE aluminium closed at RMB 24,245 per tonne, edging up 0.02 per cent. The price stood above the MA10 (24,236) but was capped by the MA5 (24,386), still well above the MA30 (24,084) and MA60 (23,729.92). The medium-term bullish structure remained intact, while short-term moving average resistance was evident.

On the MACD indicator, DIF stood at 102.44 and DEA at 125.85, with the high-level death cross persisting. The green bar narrowed to -46.80 (previous day -50.36), indicating slightly weakening bearish momentum. Trading volume shrank to 52,300 lots, reflecting a strong wait-and-see sentiment in the market. The suggested core trading range for SHFE aluminium is 24,000-24,600. LME aluminium closed at USD 3,266 per tonne, up 0.21 per cent.

The price was slightly below the MA5 (3,275.6) and MA10 (3,268.87), but above the MA30 (3,265.58) and MA60 (3,224.66), under short-term pressure while medium-term support remained intact. On the MACD indicator, DIF stood at 5.01 and DEA at 9.32, with a death cross above the zero axis. The green bar expanded to -8.62 (previous day -6.32), indicating weak short-term momentum. The suggested core trading range for LME aluminium is 3,220-3,300.

Macro front: On September 22 EST, US President Trump reiterated in his speech at the 81st UN General Assembly that the US would reach an agreement with Iran after the November midterm elections. Iranian President Pezeshkian travelled to the US to attend the UN General Assembly and is expected to deliver a speech on September 23. Iranian Foreign Minister Araghchi met with US Presidential Envoy Witkoff in New York.

Iran proposed that conditions for reopening the Strait of Hormuz include: the US immediately lifting the maritime blockade, immediately unfreezing all Iranian assets, and ending the war on all regional fronts. US President Trump stated that US officials held a three-hour meeting with the Iranian delegation, which was very productive, and another meeting would be arranged in the near future.

Fundamentals: Supply side, China's weekly aluminium production remained stable last week. Some downstream sectors saw certain production cuts, reducing liquid aluminium purchases, and the proportion of liquid aluminium edged down 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 overseas operating capacity.

Demand side, with the upcoming holiday, downstream stocking sentiment picked up slightly. 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 Tuesday, SHFE aluminium futures traded lower compared with the same session yesterday, while downstream pre-holiday stockpiling sentiment picked up. Spot aluminium was traded at parity against the SHFE aluminium 2610 contract, followed by active market buying, and then spot aluminium was traded at a premium of RMB 10 per tonne against the SHFE aluminium 2610 contract. On Tuesday, SMM A00 aluminium ingot spot was traded between parity and a premium of RMB 20 per tonne.

On Tuesday, SHFE aluminium futures edged lower from early trading yesterday, prompting traders holding cargoes in the central China market to actively raise their quotes. However, limited by weak actual buying sentiment among purchasing traders and downstream processing enterprises, transactions were poor, and transaction prices from sellers deviated significantly from quotes. Ultimately, actual transaction prices in the central China market were centred around a discount of RMB 70-90 per tonne against the SHFE aluminium 2610 contract.

South China market: On Tuesday, aluminium prices continued to edge lower, while the spot market stabilized and improved. Inventory buildup did not continue, domestic arrivals remained limited, and the market showed a firmer stance on holding back from selling, with some even actively attempting to raise prices. Mainstream transactions were concluded at a small premium, and spot supply was tight.

With the two holidays approaching, restocking demand was released to some extent, and buying sentiment was expected to be positive, with most buyers following through and accepting firm prices. Overall, the market showed a pattern of weak supply and strong demand, with good transactions. Spot transaction prices were concentrated at a premium of RMB 210-250 per tonne against the SHFE aluminium 2610 contract.

Aluminium scrap: On Tuesday, SMM A00 aluminium closed at RMB 24,270 per tonne, down another RMB 50 per tonne from the previous trading day, while the aluminium scrap market was largely stable and wait-and-see. In terms of price differences, on September 22, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was about RMB 2,512 per tonne and the price difference between A00 aluminium and shredded aluminium tense scrap was about RMB 1,291 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 central China continued to escalate, and the sharp drop in regional aluminium scrap supply will significantly disrupt aluminium scrap circulation. On the demand side, the cast aluminium alloy "September peak season" has been lacklustre, with demand yet to see a substantial release. End-user orders improved only slightly from 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 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 find 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 utilization enterprises.

Secondary aluminium alloy: Spot: On Tuesday, ADC12 market quotes were largely stable overall, with only a few enterprises lowering prices by RMB 100 per tonne. Spot prices showed some resilience, with SMM ADC12 prices holding steady at RMB 24,500 per tonne from the previous trading day.

On the cost side, aluminium scrap raw material prices saw limited fluctuations overall. However, as tax invoice policies tightened in multiple regions, compliance procurement requirements for enterprises further increased, and procurement costs for some enterprises remained high, providing strong cost support.

Although aluminium prices and futures have pulled back, constrained by high costs, enterprises have relatively limited willingness to proactively lower prices, and sentiment to hold prices firm persists in the market. Short-term ADC12 prices are expected to continue consolidating on a strong note, with cost support and compliant procurement pressure limiting the downside for prices, while weak demand recovery will also constrain the elasticity of further price rises.

Going forward, close attention should be paid to the implementation progress of tax invoice policies, changes in aluminium scrap raw material supply, and downstream stockpiling ahead of the dual holidays.

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

On the fundamentals front, production resumptions in the Middle East continue to accelerate, but some newly launched projects have been delayed, and the pace of operating capacity increases is expected to slow in the coming months. With the short holiday approaching, downstream stockpiling demand supports destocking, and aluminium prices are expected to maintain a consolidation pattern at highs in the short term.

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.