September peak season destocking supports aluminium prices, macro risks still warrant vigilance

Futures: The most-traded SHFE aluminium contract opened at RMB 24,470 per tonne in the night session on September 8, reached a high of RMB 24,660 per tonne and a low of RMB 24,420 per tonne, and closed at RMB 24,645 per tonne, up RMB 185 per tonne or 0.76 per cent from the previous close.

Futures rose sharply, with moving averages in a bullish alignment and prices trading above all major moving averages. Trading volume slipped slightly during the session, while open interest edged up, driven mainly by bullish positioning. On the technical front, the 4-hour MACD golden cross continued, with the red histogram extending further and bullish momentum is strengthening.

On September 8, LME aluminium opened at USD 3,314 per tonne, reached a high of USD 3,358.5 per tonne and a low of USD 3,308.5 per tonne, and closed at USD 3,334 per tonne, up USD 21.5 per tonne or 0.65 per cent from the previous close. Prices consolidated higher intraday, pushing further up and closing firmly above all short-term moving averages. Trading volume expanded notably on the day, while open interest pulled back slightly, driven mainly by bearish position reductions. On the technical front, the daily MACD red histogram extended and expanded, with bullish momentum strengthening further.

Macro front: Analyst Robert Howard said the US August CPI data may determine whether the US Fed leans toward hiking rates or holding steady at next week's rate decision, and will influence the US dollar's trajectory.

According to the median estimate from a Reuters survey, headline CPI is expected to rise 0.4 per cent M-o-M and 3.4 per cent Y-o-Y, while core CPI is expected to rise 0.2 per cent M-o-M and 2.4 per cent Y-o-Y. The market is currently balancing two forces: strong US economic data supporting rate hikes, and geopolitical uncertainty that continues to attract safe-haven demand. Focus now shifts to US PPI and CPI data due later this week.

According to CME FedWatch, the probability of the US Fed holding rates unchanged in September is 40.6 per cent, while the probability of a cumulative 25bp hike is 59.4 per cent. The probability of the US Fed holding rates unchanged through October is 29.8 per cent, with a 54.4 per cent probability of a cumulative 25bp hike and a 15.8 per cent probability of a cumulative 50bp hike.

Fundamentals: General Administration of Customs data showed that unwrought aluminium and aluminium semis exports in August 2026 totalled 626,000 tonnes, up 17.2 per cent Y-o-Y from 534,000 tonnes in the same period last year, but down 2.6 per cent M-o-M from 643,000 tonnes in July, a decrease of 17,000 tonnes.

Cumulative exports in the first eight months reached 4.665 million tonnes, up 16.8 per cent from 3.995 million tonnes in the same period last year. On the inventory front, aluminium ingot inventory in major consuming regions fell 7,500 tonnes W-o-W on Tuesday, with destocking seen across all three regions.

In the spot market, as aluminium futures rallied again and downstream processing enterprises, constrained by lacklustre peak-season demand, focused on reducing finished product and raw material inventories and scaled back purchases, trading sentiment in central China was sluggish, though large traders showed notable willingness to hold prices firm.

Primary aluminium market: The SHFE aluminium 2609 contract rose significantly in futures trading compared with the same period of the previous trading day. Despite inventory destocking, selling sentiment in the market was quite evident today, and spot premiums in transactions fell compared with yesterday.

SMM A00 aluminium ingot spot transactions were basically on par with to a premium of RMB 10 per tonne. Aluminium futures rallied again in the night session. In the central China market, pre-market trading quotes were relatively low. Traders tended to restock heavily at large discounts when prices dipped, and with Friday approaching, downstream processing enterprises showed recovering sentiment in purchasing and stockpiling.

Overall market trading sentiment recovered, driving quotes to gradually move higher. Ultimately, actual transaction prices in the central China market centred around a discount of RMB 110-150 per tonne against the SHFE aluminium 09 contract. Today, aluminium prices continued to edge up, while the spot market was weak.

The spot-futures price spread showed expectations of further weakening and has returned to the starting point of the previous round. In the morning, suppliers still intended to slow the pace of selling and were in no rush to adjust prices. However, higher absolute prices stimulated unilateral cash-out selling with proactive downward adjustments, exerting pressure. Meanwhile, the reappearance of inventory buildup also brought expectations of incoming supply.

Ultimately, suppliers generally returned to lowering prices for shipments, with more discounted cargo circulating in the market. Downstream just-in-time procurement showed resilience and did not weaken to the point of sluggishness. Traders continued to gradually increase market participation to take on discounted cargo, with moderate demand, and transactions improved marginally.

Aluminium scrap: Yesterday, SMM A00 aluminium closed at RMB 24,410 per tonne, up slightly by RMB 50 per tonne from the previous trading day. Aluminium scrap market prices remained generally stable with slight increases. A substantive recovery in end-use demand still needs to be observed. Inventory digestion of wrought aluminium alloy scrap still requires time. Scrap utilisation enterprises are likely to continue purchasing as needed and maintain low-inventory operating strategies, with the pace of following price increases expected to remain slow.

This week, the aluminium scrap market is expected to consolidate on a strong note with the price centre moving slightly higher. Close attention should be paid to the pace of downstream order recovery. Today, SMM A00 aluminium closed at RMB 24,460 per tonne, up slightly by another RMB 50 per tonne from the previous trading day. Aluminium scrap market prices remained generally stable with slight follow-through increases.

Regarding price differences, on September 8, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was about RMB 2,541 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was about RMB 1,320 per tonne, widening further W-o-W. On the import side, the impact of the UAE export ban and the EU tariff hike continued. The contraction in supply from Europe and the Middle East remained unchanged. High-quality scrap with invoices remained generally tight, and room for import growth was limited.

A substantive recovery in end-use demand still needs to be observed. Inventory digestion of wrought aluminium alloy scrap still requires time. Scrap utilisation enterprises are likely to continue purchasing as needed and maintain low-inventory operating strategies, with the pace of following price increases expected to remain slow.

Next week, the aluminium scrap market is expected to consolidate on a strong note with the price centre moving slightly higher. The mainstream operating range for shredded aluminium tense scrap (priced based on aluminium content) is expected to centre around RMB 20,300-21,000 per tonne. Close attention should be paid to the pace of downstream order recovery.

Secondary aluminium alloy: Spot: Today, ADC12 market quotes were generally stable with a slight upward bias, with the SMM ADC12 price rising by RMB 50 per tonne from the previous day to RMB 24,350 per tonne. Driven by higher aluminium prices and raw material costs, some enterprises raised their quotes by RMB 100 per tonne; however, given that the recovery in end-use demand remains insufficient, some enterprises chose to hold prices steady and wait, leaving overall market pricing cautious.

As the traditional peak season gradually advances, some downstream orders have improved from earlier levels, with initial signs of marginal demand recovery emerging, though the overall extent of improvement remains limited. In the short term, ADC12 prices are likely to continue consolidating on a strong note, with the upside room still depending on how fully peak-season demand materialises and on the sustainability of cost support.

Overall outlook: US nonfarm payrolls far exceeded expectations, pushing expectations for US Fed interest rate hikes higher again. Repeated disturbances in expectations for macro tightening are creating periodic pressure on aluminium price gains. China's low inventory of aluminium ingots persists, with destocking continuing, and the spot market is providing strong support for aluminium prices, remaining the dominant factor in the current market.

On the demand side, the market has entered the traditional September peak season, and operating rates at processing enterprises are recovering, but a full recovery in end-user orders still needs time, and the actual extent of peak-season fulfilment remains to be seen. Meanwhile, aluminium billet inventories continue to build, posing a potential risk of transmission to aluminium ingots.

The recovery in aluminium supply outside China continues, further limiting the upside room for aluminium prices. From a futures perspective, SHFE aluminium's technical pattern is strong but upward momentum is weakening at the margin, and insufficient trading volume is constraining the strength of any upside breakout, with SHFE and LME trends diverging. In the short term, aluminium prices are expected to consolidate on a strong note.

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.