PMI recovers in peak season with structural divergence; macro pressure combined with pre-holiday adjustment dominates market

Futures: The most-traded SHFE aluminium contract opened at RMB 23,895 per tonne in the night session on September 29, reached a high of RMB 23,960 per tonne and a low of RMB 23,845 per tonne, and closed at RMB 23,910 per tonne, down RMB 110 per tonne or 0.46 per cent from the previous close. Futures came under pressure and weakened, with prices falling below the 5/10/20/40/60 moving averages across all timeframes. All moving averages turned downward, and bearish pressure was evident. Trading volume during the session was 57,873 lots, with open interest at 267,000 lots, up 1,187 lots, driven mainly by bearish position building. On the technical front, the 4-hour MACD death cross continued, with DIFF well below DEA and the green histogram expanding further, as bearish momentum continued to be released. On September 29, LME aluminium 3M opened at USD 3,246.0 per tonne, reached a high of USD 3,268.5 per tonne and a low of USD 3,205.5 per tonne, and closed at USD 3,213.5 per tonne, down USD 34.5 per tonne or 1.06 per cent from the previous close. Futures fell under pressure, with prices breaking below the 5/10/20/40 moving averages across all timeframes and approaching the 60-day moving average, as the short-term trend weakened. Trading volume for the day was 23,778 lots, with open interest at 577,000 lots, up 2,441 lots, driven mainly by bearish position building. On the technical front, a death cross formed on the daily MACD, with DIFF crossing below DEA and the green histogram expanding further, as bearish momentum continued to be released.

Macro front: The People's Bank of China further adjusted and improved multiple monetary policy tools: it lowered the PSL interest rate by 0.25 percentage points to 1.5 per cent and expanded PSL support to the construction of the "six networks"; increased the relending quota for technological innovation and technical transformation by 200 billion yuan to 1.4 trillion yuan, with the support ratio raised to 100 per cent; and increased the relending quota for agriculture and small businesses by 500 billion yuan to 4.85 trillion yuan. According to data released on Tuesday, the US Conference Board Consumer Confidence Index fell 6.7 points to 81.9 in September, the lowest level since 2014 and well below all forecasts by economists surveyed by Bloomberg. The deterioration in confidence was broad-based, affecting all age groups, income brackets, and regions. According to CME "FedWatch": the probability of the US Fed keeping rates unchanged at 3.75 per cent-4.00 per cent at its October meeting is 49.6 per cent, while the probability of a 25-basis-point hike is 50.4 per cent. The probability of the US Fed keeping rates unchanged at 3.75 per cent-4.00 per cent through December is 8.5 per cent, with a 49.8 per cent probability of a cumulative 25-basis-point hike and a 41.8 per cent probability of a cumulative 50-basis-point hike.

Fundamentals: In September 2026, China's aluminium processing industry composite PMI came in at 53.9 per cent, returning above the 50 mark after two months. The production index was 55.6 per cent and the new orders index was 55.9 per cent, indicating that the traditional September-October peak season did provide a phased floor for operating rates and order intake. However, structural contradictions were equally acute: the new export orders index was only 47.3 per cent, still in contraction territory; the product inventory index was 56.8 per cent, with end-users wary of high prices and slowing cargo pick-up leading to finished product backlogs; the purchase price index was 50.8 per cent, and raw material inventory was 58.2 per cent, indicating strong willingness among enterprises to stockpile. As of this Wednesday, China's aluminium ingot social inventory fell by 36,000 tonnes from this Monday and by 40,000 tonnes from last Thursday.

Primary aluminium market: With the National Day holiday approaching, trading sentiment in the central China market was even more sluggish W-o-W from yesterday, with suppliers inclined to clear inventory quickly, unwilling to hold goods over the holiday, and showing little willingness to hold prices firm. Downstream processing enterprises had low willingness to stockpile before the holiday, and most had already made large purchases at earlier low prices. Ultimately, actual transaction prices in the central China market were around a discount of RMB 40-80 per tonne against the SHFE aluminium 2610 contract. On Tuesday, the SHFE aluminium 2610 contract fell by about RMB 100 per tonne from the same trading session yesterday, while spot market transactions were active and improving. At the start of today's morning session, spot A00 aluminium ingots began trading, with mainstream transaction prices at a premium of RMB 40-50 per tonne against the SHFE aluminium 2610 contract.

South China market: On Tuesday, aluminium prices continued to edge lower, and the spot market remained weak. Timely shipments to cash in and recoup funds before the month-end holiday remained the dominant theme; after brief attempts to hold prices firm failed, suppliers quickly turned to lowering prices, with even cheaper cargoes not uncommon. Against the backdrop of continued destocking, spot supply remained relatively ample. Demand-side buying was modest at lower prices, but room was already relatively limited. Coupled with expectations of potentially higher arrivals during the holiday, wait-and-see sentiment before the holiday grew stronger, with fewer buyers entering the market and lackluster transactions. Spot transaction prices were concentrated at a premium of RMB 245-285 per tonne against the SHFE aluminium 2610 contract.

Aluminium scrap: On Tuesday, SMM A00 aluminium closed at RMB 24,110 per tonne, down RMB 60 per tonne from the previous trading day. The aluminium scrap market lowered prices by RMB 50-100 per tonne, while in some regions, after following the futures down by RMB 200-300 per tonne the previous day, scrap aluminium quotes were kept flat or raised by RMB 100 per tonne today as futures rebounded, with cumulative declines this week holding RMB at 200 per tonne. In terms of price differences, on September 29, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was about RMB 2,519 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was about RMB 1,353 per tonne. On the import side, August scrap aluminium 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 and expand, with compliant invoiced aluminium scrap becoming increasingly scarce and prices strongly supported. Meanwhile, non-invoiced cargoes faced narrowing sales channels under compliance pressure, forcing some traders to cut prices to sell, with prices remaining under pressure and trending lower. On the demand side, the cast aluminium alloy market saw a lackluster "September peak season," with demand yet to show substantial growth; demand for wrought aluminium alloy was moderate, and in-factory inventory of aluminium scrap remained relatively ample. This week, the aluminium scrap market is expected to continue consolidating on a strong note, with mainstream shredded aluminium tense scrap (priced based on aluminium content) likely to trade in the range of RMB 20,500-21,200 per tonne.

Secondary aluminium alloy: Spot market: On Tuesday, the ADC12 spot market overall remained stable. On one hand, although aluminium prices and cast aluminium futures weakened, the decline in aluminium scrap raw material prices was limited, and stricter tax policies kept compliant procurement costs high, providing strong cost-side support for spot prices and limiting the willingness to follow the decline. On the other hand, with the National Day holiday approaching, downstream pre-holiday stockpiling was mediocre, with no significant increase in market transactions, and demand-side upward momentum was insufficient. Amid the tug-of-war between cost support and weak demand, short-term enterprise quotes are expected to remain stable, and future trends will require close attention to actual pre-holiday transactions, raw material costs, and futures movements.

Comprehensive outlook:On the macro front, the US Fed's hawkish rate hike cycle restart, a strong US dollar, and high US Treasury yields continued to pressure valuations of nonferrous metals; fundamentally, although domestic inventory remained low and destocking continued, the rebound in casting ingot volume combined with aluminium billet production cuts weakened liquid aluminium demand, and position adjustment pressure ahead of the National Day holiday intensified the tug-of-war between longs and shorts. Aluminium prices are expected to mainly consolidate with adjustments.

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.