Macro Headwinds & Divergent Domestic Demand Keep China Aluminium Prices Consolidating
Meta Description: Global macro pressure from Fed rate hike expectations and divergent domestic supply and demand have kept China aluminium prices range-bound. SHFE and LME aluminium futures show bearish technical signals amid mixed holiday market fundamentals.
China’s aluminium market remains stuck in consolidation, weighed by tightening global macro liquidity and uneven domestic demand performance. As of September 28, both SHFE and LME aluminium futures show weak technical momentum, while fragmented spot market trends, holiday-driven inventory shifts and diverging downstream demand further limit price movement, creating a sustained range-bound trading pattern.
Futures Market: Weak Technicals Maintain Consolidation Trend
SHFE most-traded aluminium contract closed flat with a mild 0.21% gain at RMB 24,000 per tonne on September 28. After an earlier sharp drop, prices stabilized below all short and long-term moving averages, which have shifted from support to resistance levels. Trading activity cooled with falling open interest, driven primarily by bear position reductions. Technically, the 4-hour MACD death cross persisted with expanding negative green bars, signalling lingering short-term bearish momentum.
LME 3-month aluminium futures faced stronger downward pressure, dropping 0.90% to settle at USD 3,248.0 per tonne. Prices retreated after a short-term rebound and fell below key short-term moving averages. Daily MACD continued the death cross trend with growing bearish signals, while falling open interest reflected widespread bull position liquidation, keeping international aluminium prices in volatile consolidation.
Macro Pressure: Fed Hawkish Expectations Weigh on Base Metals
US monetary policy expectations act as the core macro headwind for global aluminium pricing. Per CME Fed Watch data, the market prices a 70.9% probability of a 25bp rate hike in the October meeting, with a combined 50bp hike probability hitting 58.7% by December, pointing to sustained hawkish policy pressure.
Fed Governor Lisa Cook noted US inflation will face ongoing upward pressure from AI-driven demand growth, rising crude oil prices and Middle East conflict-related supply chain disruptions. She confirmed the US labour market can tolerate higher interest rates, leaving further rate adjustments data-dependent. Strong US dollar and elevated Treasury yields continue to suppress overall non-ferrous metal valuations.
Market Fundamentals: Divergent Global & Domestic Demand
Overseas aluminium markets face persistent supply pressure and sluggish end-user demand. Southeast Asian aluminium quotes lack upward momentum, while price divergence in South Korea is set to continue. The Japanese market hinges on post-holiday downstream restocking pace, and the US market will maintain steady consolidated trading.
Domestically, China’s aluminium processing sector maintained resilient production during the 2026 National Day and Mid-Autumn double holidays, with limited overall supply disruptions and only localized phased production cuts. Pre-holiday downstream stockpiling offered mild demand support, while sector and enterprise-level operational divergence became prominent. Post-holiday market focus remains on production resumption progress, downstream order recovery and peak-season demand performance.
Primary Aluminium Spot & Inventory Dynamics
SHFE aluminium spot premiums fluctuated between RMB 30–50 per tonne pre-holiday, with active downstream procurement and strong trading sentiment in early sessions. However, upstream shipment curbs amid falling futures prices weakened spot market momentum.
Regional market divergence intensified after the holiday. Central China saw sluggish restocking sentiment and early completion of pre-holiday stocking, with spot prices slipping to a discount of RMB 20–70 per tonne. Inventory trends remained fragmented: Guangdong and Wuxi posted 1,000-tonne destocking respectively, while central China registered a 2,000-tonne inventory build-up.
The South China spot market trended weakly with no holiday inventory accumulation. Suppliers rushed cash settlement ahead of the National Day holiday, leading to increased discounted cargo supply. Cautious buyer sentiment capped restocking activity, resulting in muted overall transaction volumes.
Aluminium Scrap & Secondary Alloy Market Trends
SMM A00 aluminium ingots fell RMB 70 week-on-week to RMB 24,170 per tonne, with aluminium scrap prices dropping RMB 100 per tonne. Noticeable price gaps persist between primary aluminium and scrap varieties, maintaining profit space for secondary aluminium production.
August aluminium scrap imports rebounded month-on-month thanks to resumed shipping schedules and Southeast Asian supply replenishment. Strict tax inspections across Henan, Hunan and other regions have tightened compliant scrap supply, supporting formal cargo prices, while unregulated inventories face sales pressure and price downside risks. Downstream casting alloy demand failed to meet September peak-season expectations, with wrought alloy demand remaining moderate and factory scrap inventories sufficient. The secondary scrap market is expected to consolidate strongly, with mainstream shredded aluminium scrap trading at RMB 20,500–21,200 per tonne.
ADC12 secondary aluminium alloy prices stayed stable at RMB 24,500 per tonne. Tight tax compliance policies elevated raw material procurement costs, forming solid cost support for alloy prices. Pre-holiday downstream stocking activity remained mediocre with limited transaction growth, keeping alloy prices range-bound in the short term.
Comprehensive Market Outlook
Aluminium prices will continue range-bound consolidation in the near term. On the macro front, Fed hawkish rate hike expectations, a strong US dollar and high bond yields will keep weighing on market sentiment. On the fundamental side, low overall social inventories and sustained destocking offer mild support, while rising casting ingot output and reduced aluminium billet production weaken liquid aluminium demand.
Pre-holiday position adjustment pressure intensifies the long-short game in the aluminium market. Without clear catalyst for demand recovery or supply contraction, aluminium prices will maintain a volatile consolidation pattern in the short run.
