Domestic and overseas macro tailwinds, multiple factors support aluminium prices to hold up well in the short term

In the futures market, the most-traded SHFE aluminium 2510 contract opened at RMB 20,995 per tonne during the night session, reaching a highest price of RMB 21,095 per tonne and a lowest price of RMB 20,955 per tonne, closing at RMB 21,060 per tonne, up RMB 40 per tonne from the previous close, with a gain of 0.19 per cent.

The trading volume was 48,200 lots, and the open interest was 178,000 lots. LME opened at USD 2,698 per tonne, reached a high price of USD 2,705 per tonne, and a lowest price of USD 2,680 per tonne, closing at USD 2,704.5 per tonne.

On the macro front, the overall sentiment is bullish. Domestically, NBS data showed that industrial output in August increased 5.2 per cent YoY and 0.37 per cent m-o-m, with a 6.2 per cent YoY increase for January-August, supporting aluminium demand. Spokesperson Fu Linghui also noted that the economy in August was stable and high-quality development advanced, boosting market confidence in aluminium demand, driving prices from the demand side.

On Monday, Trump called on Fed Chairman Powell to cut interest rates by a "bigger margin" and mentioned the real estate market. According to CME's FeWatch tool, traders have fully priced in a 25-basis-point rate cut at the FOMC meeting on September 16-17, with a 5 per cent probability of a 50-basis-point cut, providing supportive conditions for aluminium prices.

Fundamentally, as we enter the traditional peak season in September, the proportion of liquid aluminium is expected to rebound slightly. Although weekly costs have declined somewhat due to weaker alumina support, the demand side has shown signs of recovery, with many extrusion enterprises reporting improved order situations. The operating rate of leading domestic aluminium extrusion enterprises rose 1 percentage point m-o-m to 54 per cent.

In terms of inventory, although outflows from warehouses have improved in September, premiums and discounts remain under pressure. It is reported that while in-transit cargoes are expected to decrease, the decline is not significant. Inventory data on Monday again showed an inventory buildup, and whether destocking will turn around in mid-September remains to be observed. Overall, both domestic industrial data and international interest rate cut expectations are bullish for aluminium prices, providing upward momentum. Coupled with the overall improvement in fundamentals, SMM expects aluminium prices to hold up well 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.