US Treasury yields rise, pressuring aluminium prices to consolidate at highs amid mixed signals

Futures: The most-traded SHFE aluminium 2610 contract closed at RMB 23,990 per tonne, down RMB 15 from yesterday's settlement price, a decline of 0.06 per cent. It opened at RMB 23,995 per tonne during the day and fluctuated within a range of RMB 23,950-24,055 per tonne. Prices traded below the MA5 (24,262.00), MA10 (24,295.00), and MA30 (24,048.83), but above the MA60 (23,604.42).

The short-term upward structure continued to face resistance, with a narrow sideways consolidation pattern emerging, and the short-term moving averages above formed key pressure. The MACD indicator's DIF (127.6789) was below the DEA (155.8754), and the MACD green bar stood at -56.3931, indicating that bullish momentum continued to weaken.

The core trading range for SHFE aluminium is suggested at RMB 23,600-24,500 per tonne. The LME aluminium 3M contract closed at USD 3,252.50 per tonne, up 0.03 per cent. It opened at USD 3,248 per tonne during the day and fluctuated within a range of USD 3,247.00-USD 3,252.50 per tonne. Prices traded below the MA5 (3,279.00), MA10 (3,294.95), and MA30 (3,267.05), but above the MA60 (3,213.12).

The short-term upward structure continued to face resistance, with a narrow sideways consolidation pattern emerging, and the short-term moving averages above formed clear pressure. The MACD indicator's DIF (10.0531) was below the DEA (14.2417), and the MACD green bar stood at -8.3772, indicating that bullish momentum continued to weaken, with consolidation at highs followed by a pullback. The core trading range for LME aluminium is suggested at USD 3,150-USD 3,300 per tonne.

Macro front: US President Trump said he is "open" to negotiations with Iran that the US is helping oil shipments in the Strait of Hormuz, and that countries should provide "escort compensation" to the US. Trump said Iran is "desperate" to reach a deal, and the US side is open to this prospect. Although Iran has repeatedly stated that it does not wish to negotiate with the US government on reaching an agreement, Trump once again claimed that Iran wants to reach a deal quickly.

The Islamic Revolutionary Guard Corps Navy issued a statement saying that the supertanker "Al Ghaya" struck a mine while attempting to cross a prohibited zone south of the Strait of Hormuz, followed by an explosion. The statement stressed that warnings had previously been issued about the dangers of this illegal route, and that the Strait of Hormuz has been blocked and remains under Iran's intelligent control.

US Treasuries suffered a new round of heavy selling, with the 10-year yield breaking above the 5 per cent mark on Monday, hitting a new high since 2023. Inflation concerns and supply pressure formed a resonance, putting global bond markets under pressure. China's central bank will conduct a 500 billion six-month outright reverse repo operation on September 15. Given that RMB 500 billion yuan of six-month outright reverse repos mature in September, this means that this month's six-month outright reverse repos will be rolled over in equal amounts, marking the second consecutive month of equal-amount rollover.

Fundamentals: Outside China, aluminium production resumptions continued to ramp up, and expectations of easing supply in the long term persisted. However, LME inventory stood at only 245,000 tonnes last week, an extremely low historical level.

Combined with surging oil prices driving up costs and shipping disruptions in the Strait of Hormuz, geopolitical supply risk premiums rebounded. In China, the "September peak season" saw broad-based recovery across sectors, with social inventory continuing to destock.

On the inventory side, the destocking trend in aluminium ingot social inventory continued during the week. As of Monday this week, aluminium ingot inventory in major consumption areas 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: SHFE aluminium futures fell from the previous trading day today, with market purchasing sentiment clearly improving. Combined with strong warehouse withdrawals, suppliers raised their spot premium quotes. Today, spot A00 aluminium ingot transactions against the SHFE aluminium 2610 contract were concluded between parity and a premium of RMB 20 per tonne.

With the mismatch between September peak season expectations and sluggish reality, downstream processing enterprises in the central China market maintained a cautious procurement pace of buying only small volumes as needed amid high absolute aluminium prices, focusing on reducing in-factory inventory.

Only trading firms engaging in both spot and futures market purchased in large volumes, while major suppliers showed poor willingness to sell due to the large discounts. Ultimately, actual transaction prices in the central China market were concentrated in the range of a discount of RMB 150-180 per tonne against the 09 contract.

Today, aluminium prices continued to fall sharply, and the spot market stabilised. With prices already well below the monthly average clearly limiting one-way outflows, and arrivals falling short of expectations while inventory continued to decline, suppliers firmly held prices and held back from selling at lows, with quotes showing almost no discount and actual circulation remaining tight.

The price decline prompted downstream buyers to steadily replenish inventory. Although the procurement pace was not urgent, the foundation was relatively solid, which in turn drove traders to increase market participation in purchasing for delivery. Overall demand improved, and transactions were moderate.

Aluminium scrap: Today, SMM A00 aluminium prices closed at RMB 24,080 per tonne, down RMB 160 per tonne from the previous trading day, while aluminium scrap market prices followed with declines of RMB 100-150 per tonne. On the price difference front, as of September 14, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was approximately RMB 2,459 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was approximately RMB 1,238 per tonne.

On the supply side, the tight raw material supply situation remained unchanged, with the scarcity of compliant invoiced aluminium scrap continuing to rise, constraining scrap utilisation enterprises' operations and purchases. Against this backdrop, some aluminium scrap yards actively sold amid high aluminium prices while correspondingly reducing purchases and stockpiling, leading to a phased release of circulating supply.

The aluminium scrap market is expected to continue consolidating on a strong note this week. With the September peak season underway, a substantive recovery in downstream end-user orders still requires observation. Scrap yards' active selling behaviour may persist in the near term, but the tightness in high-quality invoiced scrap is unlikely to see substantive improvement.

Shredded aluminium tense scrap (priced based on aluminium content) is expected to trade mainly within the range of 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 activity.

Secondary aluminium alloy:Spot: Today, ADC12 market prices were mainly slightly lower, with the SMM ADC12 price down RMB 100 per tonne from the previous trading day to RMB 24,200 per tonne. The price weakness was mainly driven by the decline in aluminium prices and futures, with some enterprises adjusting quotes in line with the market, but the overall extent of price cuts was relatively limited, reflecting that enterprises still hold some expectations of cost-side support and are not strongly inclined to make significant voluntary price concessions.

On the demand side, downstream procurement overall maintained a just-in-time pace. Although some purchasing demand was released after prices pulled back, a clear restocking-on-dips trend has yet to form, and traditional peak season demand improvement remains relatively limited. Overall, ADC12 prices are expected to continue to move sideways in the short term, with close attention on raw material-side changes and whether "September peak season" demand can be further released.

Overall outlook: On the macro front, expectations of interest rate hikes and a strong US dollar are weighing on the market, with US Treasury yields surging and the US dollar index strengthening, putting pressure on the nonferrous metals sector. However, expectations for the opening of safe commercial shipping lanes in the Strait of Hormuz remain unclear.

Fundamentally, China's continued destocking combined with peak season demand recovery provides relatively strong support below, and the central bank's RMB 500 billion six-month outright reverse repo operation has eased expectations of domestic liquidity tightening, providing mild support to aluminium prices. 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.