Aluminum prices rose slightly in September

According to the Commodity Market Analysis System of SunSirs, the average price of domestic aluminum ingots in the East China market on September 28, 2023 was 19,856.67 RMB/ton, an increase of 1.26% compared to the aluminum price of 19,610 RMB/ton at the beginning of the month (September 1).

In the long term, as of the end of September, prices had been in a sideways range after a high decline. Since May, prices had been fluctuating below 19,000 RMB/ton, breaking through 19,000 RMB/ton by the end of August. In September, aluminum prices fell first and then rose, with an overall fluctuating upward trend.

Overview of Fundamentals

The weekly production was around 820,000 tons

The domestic weekly production in September was around 820,000 tons. Electrolytic aluminum supply exceeded expectations and resumed production in the third quarter. With the resumption of production of electrolytic aluminum enterprises in the southwest region, the production capacity was at a relatively high level. Although the power cuts and production cuts in Sichuan had sparked concerns in the short term, the interference had gradually weakened due to the small scale of the reduction and the improvement in precipitation in Sichuan. As of the end of September, the operating capacity in Yunnan region was relatively high.

From a regional perspective, the price difference between aluminum in South China and East China recently expanded significantly in China. From the perspective of the flow of goods, there was a phenomenon of arbitrage in the shipment of goods from South China to East China. It was expected that some South China holders carried out cross regional arbitrage in the inventory of East China. In the future, the spot pressure in South China might decrease, and the East China region might show a state of accumulated inventory after the holiday, with the addition of imported goods and supplies from other regions such as South China.

Social inventory increased first and then decreased in September

In terms of social inventory, following the start of destocking in the second half of July, inventory was relatively low. In September, social inventory first increased and then decreased.

As of September 28th, the social inventory in the mainstream areas of domestic electrolytic aluminum ingots was 473,000 tons. Compared to September 21st, there were 33,000 tons of inventory destocked. However, compared to August 31st, the inventory was 457,000 tons and the accumulated inventory was 16,000 tons. Based on year-on-year data, it was still at a low level in the same period of the past five years.

On September 29th, LME aluminum inventory recorded 486,100 tons, a decrease of 4,225 tons or 0.86% compared to the previous day; In the past week, LME aluminum inventory had increased by 3,750.00 tons, an increase of 0.78%; In the past month, LME aluminum inventory has decreased by 31,300 tons, a decrease of 6.05%.

The demand side was less than expected

In terms of demand, there was not an improvement in the orders and operating conditions of construction factories in Shandong, Guangdong and other regions, and some small and medium-sized construction profile processing enterprises had not yet received new orders. The downstream peak season effect was not as significant as expected during the peak season. As of September 30th, downstream aluminum bars and other primary processing enterprises in the aluminum industry maintain stable production during holidays, and there were basically no plans to suspend production for holidays. It was expected that the proportion of domestic aluminum water would remain stable during the festival, and the amount of ingots cast during the festival would not surge.

Market outlook

Electrolytic aluminum production enterprises mainly maintained stable production, and the growth rate of operating capacity had significantly slowed down. As of September 30th, aluminum ingot inventory continued to be low, which provided some support for aluminum prices. As of September 30th,supply was sufficient, and demand was less than expected. In the peak season of the future market, demand needs to be fulfilled. It is expected that low inventory will continue to dominate the market trend in the short term, and aluminum prices will fluctuate stronger.

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