Macro rate hike expectations pressure aluminium prices, while China's continued destocking underpins the market

Futures: The most-traded SHFE aluminium 2610 contract closed at RMB 24,000 per tonne, down RMB 190 from yesterday's settlement price, a decline of 0.79 per cent. It opened at RMB 24,100.00 per tonne during the day and fluctuated within a range of RMB 23,920-24,100 per tonne. The price traded below MA5 (24,349.00), MA10 (24,303.50), and MA30 (24,041.67), but above MA60 (23,597.08). The short-term upward structure faced resistance and pulled back, with a consolidating correction structure emerging. The short-term moving averages above formed key pressure. The MACD DIF (155.0670) was below DEA (162.3661), and the MACD green bar stood at -14.5982. Bullish momentum weakened somewhat. The core trading range for SHFE aluminium is suggested at RMB 23,700-24,500 per tonne. The LME aluminium 3M contract closed at USD 3,250.50 per tonne, down 0.18 per cent. It opened at USD 3,262.50 per tonne during the day and fluctuated within a range of USD 3,250.00-3,264.00 per tonne. The price traded below MA5 (3,295.10), MA10 (3,296.85), and MA30 (3,266.17), but above MA60 (3,214.89). The short-term upward structure faced resistance and pulled back, with an overall consolidating correction structure emerging. The short-term moving averages above formed clear pressure. The MACD DIF (-13.1869) was below DEA (15.2729), and the MACD green bar was -4.1719. Bullish momentum weakened somewhat, with consolidation and pullback at highs. The core trading range for LME aluminium is suggested at USD 3,200-3,300 per tonne.

Macro front: US President Trump said the US should have the lowest interest rates in the world. White House National Economic Council Director Kevin Hassett said both Trump and he saw no reason to raise rates, and it was important for the Fed to maintain the status quo before the election. Trump fully respects the independence of Fed Chairman Warsh and will support them whatever they decide. Oman's Foreign Ministry announced that the regional meeting originally scheduled for September 14 in the southern Omani port city of Salalah would be postponed. A new date will be set later. The move aims to create suitable conditions for constructive dialogue, promote sustainable consensus conducive to maintaining regional security and stability, and respond to the expectations of the region's people for cooperation and peace. Iran previously said Iran, Iraq, and other Persian Gulf coastal states would hold a regional meeting in Oman to exchange views on establishing safe commercial shipping lanes in the Strait of Hormuz.

Fundamentals: Outside China, aluminium production resumptions continued to ramp up, and expectations of easing supply in the longer term remained. However, LME inventory stood at only 245,000 tonnes last week, at a historically extremely low level. Combined with surging oil prices pushing up costs and shipping disruptions in the Strait of Hormuz, geopolitical supply risk premiums rebounded. Domestically, during the "September peak season," various sectors generally recovered, and social inventory continued to destock. On the inventory side, the destocking trend of aluminium ingot social inventory continued this week. On Monday this week, aluminium ingot inventory in major consuming regions in China stood at 776,000 tonnes, down 20,000 tonnes from last Thursday and down 26,000 tonnes W-o-W from last Monday.

Primary aluminium market: Today, overall futures fell significantly from the previous trading day. Market purchasing sentiment improved, but selling sentiment was mediocre. SHFE aluminium spot traded at parity to a premium of RMB 20 per tonne against the SHFE aluminium 2609 contract. Aluminium prices fell, and shipments decreased today. The expectation of a September peak season was misaligned with the sluggish reality. With absolute aluminium prices remaining high, downstream processing enterprises in the central China market continued to maintain a procurement pace of buying only as needed in small quantities, cautiously stockpiling and mainly reducing in-factory inventory. Only trading firms engaging in both spot and futures market purchased in large volumes, and large suppliers, constrained by deep discounts, showed poor willingness to sell. Ultimately, actual transaction prices in the central China market were centred around a discount of RMB 150-180 per tonne against the 09 contract. Today, aluminium prices plunged, and the spot market was in the doldrums. Multiple intertwined factors left suppliers divided. On one hand, the sharp short-term drop in absolute prices prompted a renewed willingness to hold prices firm. On the other hand, increased arrivals and rising inventory, with expectations of further replenishment, strengthened the desire to liquidate, especially with the weekend approaching, keeping spot circulation controllable. Downstream restocking demand at lower prices recovered somewhat. Traders pushing for lower prices could not fully satisfy their purchasing needs and gradually accepted buying at firm prices, with overall satisfactory transactions.

Aluminium scrap: Today, SMM A00 aluminium closed at RMB 24,240 per tonne, down sharply by RMB 320 per tonne M-o-M from the previous trading day. Aluminium scrap market prices followed the decline with relatively cautious adjustments. In terms of price spreads, on September 11, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was about RMB 2,508 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was about RMB 1,287 per tonne, widening slightly again W-o-W. On the supply side, the tight raw material supply situation remained unchanged, and the scarcity of compliant, invoiced aluminium scrap continued to rise, constraining scrap utilisation enterprises' operations and procurement. Against this backdrop, some aluminium scrap yards actively shipped out material amid high aluminium prices while correspondingly reducing purchases and stockpiling, leading to a phased release of market supply. The aluminium scrap market is expected to continue consolidating on a strong note next week. At the early stage of the September peak season, a substantive recovery in downstream end-user orders still needs to be observed. Active selling by scrap yards may persist in phases, but the tight supply of high-quality invoiced scrap is unlikely to improve materially. The mainstream operating range for shredded aluminium tense scrap (priced based on aluminium content) is expected to be around RMB 20,700-21,300 per tonne, with close attention needed on the pace of downstream order recovery and the sustainability of scrap yard selling behaviour.

Secondary aluminium alloy: Spot market: Today, the ADC12 market overall showed characteristics of lower prices and divergent transactions. SMM ADC12 price fell RMB 150 per tonne from the previous day to RMB 24,300 per tonne. Demand side, as prices pulled back, downstream purchasing sentiment remained cautious, with most enterprises reporting that clients were mainly taking a wait-and-see approach and making just-in-time procurement. However, some purchasing demand that had been postponed during the earlier sustained price rally was released after the pullback, and low-priced cargoes provided a certain stimulus to phased restocking demand, with trading volumes at some enterprises improving compared with the earlier period. In the short term, price trends will still mainly hinge on cost support and whether "September peak season" demand can be further realised.

Comprehensive outlook: On the macro front, expectations of interest rate hikes and a strong US dollar are exerting pressure. Fed Chairman Warsh delivered a hawkish debut speech at the Jackson Hole symposium, and with August nonfarm payrolls beating expectations, CME data showed the probability of a 25bp rate hike in September rising to around 60 per cent. US Treasury yields surged, and the US dollar index hit a 13-month high, weighing on the nonferrous metals sector. However, expectations for the opening of safe commercial shipping lanes in the Strait of Hormuz remain uncertain. On the fundamental side, China's continued destocking, coupled with recovering peak-season demand, provides relatively strong support below. Aluminium prices are expected to continue to consolidate 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.