Macro headwinds combined with divergent domestic demand in China keep aluminium prices consolidating

The most-traded SHFE aluminium contract opened at RMB 24,000 per tonne in the night session on September 28, reached a high of RMB 24,055 per tonne and a low of RMB 23,950 per tonne, and closed at RMB 24,000 per tonne, up RMB 50 per tonne or 0.21 per cent from the previous close. Futures stabilised after a sharp decline, with prices falling below the 5/10/20/40/60 moving averages across all timeframes, turning these averages from support into resistance. Trading volume during the session was 53,872 lots, with open interest at 271,000 lots, down 3,240 lots, driven mainly by bear position reductions.

On the technical front, the 4-hour MACD death cross continued, with DIFF trading well below DEA and green bars expanding significantly, indicating strong short-term bearish momentum. On September 28, LME aluminium 3M opened at USD 3,275.0/tonnes, reached a high of USD 3,275.0/tonnes and a low of USD 3,222.5 per tonne, and closed at USD 3,248 per tonne, down USD 29.5/tonnes or 0.90 per cent from the previous close.

Futures retreated after a rapid rise to close lower, with moving averages across all timeframes intertwined, and prices pulled back below the short-term moving averages, maintaining a sideways consolidation pattern. Open interest for the day was 575,000 lots, down 2,090 lots, driven mainly by bull position liquidation. On the technical front, the daily MACD maintained a death cross, with DIFF trading below DEA and green bars expanding again, indicating strengthening bearish momentum.

According to CME “Fed Watch”: The probability of the Fed keeping rates unchanged at 3.75 per cent-4.00 per cent at the October meeting is 29.1 per cent, while the probability of a 25bp hike is 70.9 per cent. The probability of the Fed keeping rates unchanged at 3.75 per cent-4.00 per cent by December is 5.0 per cent, with a 36.3 per cent probability of a cumulative 25bp hike and a 58.7 per cent probability of a cumulative 50bp hike.

Fed Governor Lisa Cook said US inflation will continue to face pressure in the coming months, mainly from AI-related demand growth, rising oil prices, and supply chain disruptions caused by Middle East conflicts, but she did not explicitly indicate that further rate hikes are needed. Cook said the labour market is currently “capable of withstanding higher interest rates,” and the magnitude and frequency of future monetary policy adjustments will depend on how the economy responds to policy actions, as well as inflation and employment data in the coming months.

The core contradiction in the overseas US dollar aluminium market recently remains supply-side pressure and weak demand. In the short term, Southeast Asian market quotes are unlikely to strengthen, and the price divergence pattern in the South Korean market may persist; the Japanese market needs to watch the pace of downstream restocking after the holiday; the US market is expected to continue operating steadily.

During the 2026 National Day and Mid-Autumn Festival holidays, China’s aluminium processing sectors overall maintained relatively high production continuity, with holiday factors having relatively limited impact on supply-side disruptions, but there were clear divergences in operations across sectors and enterprises.

Overall, during the double holidays, the supply side of the aluminium processing industry remained resilient, with phased production cuts in some areas. Pre-holiday downstream stockpiling provided some support to demand. After the holidays, focus should be on the pace of production resumptions at enterprises, improvement in downstream orders, and the further impact of aluminium price trends on peak-season demand.

Primary aluminium market: Spot prices against the SHFE aluminium 2610 contract were at a premium of 30-40 yuan/tonnes, with cargoes with invoices dated next month concentrated. On Monday, suppliers reported strong transactions, with downstream purchases relatively active.

However, upstream reduced shipments due to falling aluminium prices. SMM A00 aluminium ingot spot transactions were at a premium of RMB 30-50 per tonne against the SHFE aluminium 2610 contract. On the first trading day after the Mid-Autumn Festival, downstream processing enterprises in central China showed low stockpiling sentiment, and National Day holiday stockpiling had largely ended.

Although SHFE aluminium futures fell further, overall market trading sentiment remained sluggish. Suppliers tended to sell quickly to clear inventory, with weak willingness to hold prices firm, and transaction prices continued to decline.

Ultimately, the actual transaction price range in central China was around a discount of 20-70 yuan/tonnes against the SHFE aluminium October contract. Inventory trends in the three regions continued to diverge, with Guangdong destocking by 1,000 tonnes, Wuxi destocking by 1,000 tonnes, and central China seeing an inventory buildup of 2,000 tonnes.

South China market: On Monday, aluminium prices edged down, and the spot market remained weak. After the short holiday, inventory did not accumulate, and absolute prices were weak. In early trading, suppliers generally tried to hold prices firm and were in no rush to sell, but with spot-futures price spread expectations already at high levels and the National Day holiday approaching, the need to sell for cash became stronger. Quotes gradually shifted lower, with ample supply of discounted cargoes. On the demand side, buyers were somewhat bearish and cautious, with limited restocking demand. Combined with caution on spot-futures price spread trends and more selling than buying, transactions were less than ideal.

Aluminium scrap: On Monday, SMM A00 aluminium closed at RMB  24,170 per tonne, down RMB 70 per tonne W-o-W from the previous trading day, while the aluminium scrap market overall fell by RMB 100 per tonne. In terms of price differences, on September 24, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was about RMB 2,533 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was about 1,312 yuan/tonnes.

On the import side, August aluminium scrap imports recovered M-o-M, mainly due to the resumption of shipping schedules and replenishment from Southeast Asian sources. In terms of supply, tax inspections in Henan, Hunan, and other regions continued to deepen, with compliant invoiced aluminium scrap becoming increasingly scarce and prices strongly supported.

Meanwhile, non-invoiced cargoes faced narrowing sales channels under compliance pressure, with some traders forced to cut prices to sell, keeping prices under downward pressure. On the demand side, the “September peak season" for cast aluminium alloy was less robust than expected, with demand yet to see substantial growth.

Demand for wrought aluminium alloy was moderate, and in-factory aluminium scrap inventory was relatively ample. The secondary aluminium scrap market is expected to continue consolidating on a strong note this week, with mainstream shredded aluminium tense scrap (priced based on aluminium content) likely to trade around RMB 20,500-21,200 per tonne. Focus should be on the expanding scope of tax inspections and downstream stocking ahead of the National Day holiday.

Secondary aluminium alloy:Spot: On Monday, ADC12 market quotes overall remained stable, with enterprises showing generally weak willingness to adjust prices. SMM ADC12 price held steady at RMB 24,500 per tonne from the previous trading day. Cost side, although aluminium prices and futures weakened, the adjustment in aluminium scrap raw material prices was limited.

Coupled with stricter enforcement of tax invoice policies recently, compliant raw material procurement costs for some enterprises remained at relatively high levels, with the cost side providing strong support for spot prices.

Demand side, with the National Day holiday approaching, downstream pre-holiday stockpiling was relatively mediocre, with market transactions lacking notable growth, and the demand side providing limited upward momentum for prices. Overall, enterprise quotes are expected to remain stable before the holiday, with subsequent trends requiring close attention to actual transactions and raw material cost changes.

Comprehensive outlook: Macro front, the US Fed's hawkish rate hike cycle restart, a strong US dollar, and high US Treasury yields continued to weigh on nonferrous metals valuations. Fundamentals, China’s inventory remained low with destocking continuing, but rising casting ingot volumes combined with aluminium billet production cuts led to weaker liquid aluminium demand. Coupled with open interest adjustment pressure ahead of the National Day long holiday, the tug-of-war between longs and shorts intensified, with aluminium prices expected to consolidate mainly.

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.