US inflation raises rate hike expectations, export destocking supports aluminium prices in the doldrums

Futures: The most-traded SHFE aluminium 2611 contract closed at RMB 23,120 per tonne, down RMB 225 or 0.96 per cent from yesterday's settlement price. It opened at RMB 23,155.00 per tonne and fluctuated between 23,105 and RMB 23,310 per tonne. Prices traded below the MA5 (23,332.00), MA10 (23,604.50), MA30 (24,012.83), and MA60 (23,822.42), continuing to weaken and consolidate on a subdued note at low levels, with the moving averages above forming key resistance. The MACD DIF (-205.8355) remained below the DEA (-88.0924), and the MACD green bar stood at -235.4861, indicating persistent bearish momentum. The suggested core trading range for SHFE aluminium is 22,900-23,400 RMB per tonne. The LME aluminium 3M contract settled at USD 2,990.50 per tonne, up 0.05 per cent. It opened at USD 2,990.00 per tonne and fluctuated between USD 2,988.50 and USD 2,994.00 per tonne. Prices traded below the MA5 (3,023.60), MA10 (3,064.80), MA30 (3,196.77), and MA60 (3,217.42), stabilising slightly at low levels after the continued decline, with a weak consolidation structure emerging at lows and the moving averages above forming clear resistance. The MACD DIF (-65.6867) remained below the DEA (-48.3610), and the MACD green bar stood at -34.6515, with bearish momentum still dominant. The suggested core trading range for LME aluminium is USD 2,900-3,050 per tonne.

Macro front: Data released by the US Bureau of Labor Statistics showed that US September CPI rose 3.7 per cent YoY, the largest increase in nearly five months and above market expectations of 3.6 per cent. Core CPI rose 2.6 per cent YoY, versus expectations of 2.5 per cent, marking the largest increase in nearly four months. US September CPI rose 0.6 per cent MoM, the largest increase since April, while core CPI rose 0.3 per cent MoM, above market expectations. Following the data release, traders significantly raised bets on a US Fed rate hike in October. The People's Bank of China will conduct a RMB 700 billion six-month outright reverse repo operation on Oct 15. With RMB 500 billion of six-month outright reverse repos maturing in October, this operation will result in a net injection of RMB 200 billion. The combined rollover of three-month and six-month outright reverse repos in October totalled RMB 400 billion.

Fundamentals: General Administration of Customs data showed that China's unwrought aluminium and aluminium semis exports reached 656,000 tonnes in September 2026, up 4.8 per cent MoM from 626,000 tonnes in August (an increase of 30,000 tonnes) and up 25.9 per cent YoY from 521,000 tonnes in the same period last year, marking the highest monthly export level in the past three months. On domestic aluminium ingot social inventory, as of Thursday this week, China's aluminium ingot social inventory stood at 636,000 tonnes, down 15,000 tonnes from Monday and down 50,000 tonnes WoW from last Thursday, with aluminium destocking continuing.

Primary aluminium market: East China market, SHFE aluminium futures continued to decline yesterday, with the near-month BACK spread widening to fluctuate around 200-220 RMB per tonne, but spot market quotes remained firm. Spot prices against the SHFE aluminium 2611 contract were at a premium of 260-270 RMB per tonne during the day. Central China market, SHFE aluminium futures pulled back yesterday, and trading sentiment in the central China market remained sluggish. The inter-contract spread continued to widen, and buying sentiment among downstream processing enterprises and traders remained subdued. Moreover, uncertainty in the futures market prompted suppliers to sell quickly to realise cash and reduce variables, with limited willingness to hold prices firm. Ultimately, actual transaction prices in the central China market were concentrated in a range of a discount of 150-180 RMB per tonne against the SHFE aluminium November contract. South China market, aluminium prices continued to fall yesterday, and the spot market remained weak. The backwardation structure was steep, and the elevated basis before and after contract rollover continued to exert major pressure on spot cargoes. Suppliers generally opted to realise cash at high levels in a timely manner, with no intention of holding inventory proactively. Selling enthusiasm was high, and more quotes were lowered, with mainstream quotes ranging from a discount to parity, leaving spot circulation at ample discounts. With absolute prices falling for consecutive sessions, wait-and-see sentiment intensified, and the pace of incremental replenishment remained relatively steady. Coupled with wariness of the high basis and limited market participation, overall demand failed to match supply, resulting in lackluster transactions. Spot transaction prices were concentrated at a premium of 310-350 RMB per tonne against the SHFE aluminium 2611 contract.

Aluminium scrap: Yesterday, SMM A00 aluminium price closed at RMB 23,620 per tonne, down RMB 90 per tonne WoW from the previous trading day. Wait-and-see sentiment spread on the buying side, and aluminium scrap quotes in multiple regions such as Foshan, Hunan, Hubei, and Anhui remained unchanged. In terms of price differences, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was about RMB 2,323 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was about RMB 990 per tonne. As of mid-October, the aluminium scrap market continued to hold up well. Supply side, aluminium scrap yards have all resumed operations after a brief shutdown, and material release has increased somewhat. However, recycling policies still constrain liquidity, with invoice quota limitations being a widespread issue. The tight invoice supply situation is unlikely to ease in the short term, and tight supply will continue to support prices. Demand side, as the traditional peak consumption season for cast aluminium alloy gradually kicks in, enterprises are accelerating order-taking and procurement pace. Under the dual-tight supply-demand conditions, price support for aluminium tense scrap is expected to strengthen further. Demand for wrought aluminium alloy is moderate, and in-factory inventory is relatively ample. However, with tax audits restricting supply, aluminium scrap supply is expected to decline, and the upward price channel will gradually open up.

Secondary aluminium alloy: Futures: Yesterday, the most-traded AD2612 cast aluminium alloy futures contract opened at RMB 23,090 per tonne, shot up to RMB 23,125 per tonne in early trading before encountering resistance and pulling back. In the morning session, it declined step by step to hit a daily low of RMB 22,970 per tonne, then stabilised and consolidated. In late trading, it rebounded on increased volume and closed at RMB 23,060 per tonne at midday, down RMB 30 per tonne from the previous settlement price, a decline of 0.13 per cent. Resistance is seen at RMB 23,300 per tonne, with support at RMB 22,900 per tonne. Spot: The ADC12 market was largely stable overall yesterday, with strong short-term wait-and-see sentiment. SMM ADC12 prices were flat from the previous day at RMB 24,500 per tonne. Currently, cost support from aluminium scrap raw materials remains firm, and enterprises still have a strong willingness to hold prices firm, limiting the downside for spot prices. Overall, ADC12 prices are expected to continue a steady adjustment trend in the short term, with future movement still hinging on aluminium price fluctuations, changes in aluminium scrap costs, and end-use demand performance.

Overall outlook: US September CPI came in above market expectations, and expectations for US Fed interest rate hikes continued to heat up, persistently weighing on valuations across the nonferrous sector. In China, September unwrought aluminium and aluminium semis exports hit the highest monthly export level in the past three months, with aluminium semis exports maintaining a solid trend. Combined with continued destocking of China's aluminium ingot social inventory, this provides support for prices. On the whole, under pressure from expected US Fed rate hikes, aluminium prices are expected to maintain a weak trend in the short term.
 

Note: This article has been shared by SMM and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.