Aluminium prices remained under pressure on October 7, 2026, as macroeconomic stagflation concerns combined with softening downstream demand to keep the metal consolidating at subdued levels. LME aluminium 3-month contracts opened at USD 3,140.5 per tonne, hitting a high of USD 3,148 per tonne before closing at USD 3,125 per tonne, down USD 18.5 per tonne or 0.59 percent from the previous session. Trading volume reached 16,383 lots with open interest at 567,000 lots, driven predominantly by bearish positioning, according to SMM data.
Technical indicators reinforced the bearish momentum. Futures prices broke below the 5, 10, 20, 40, and 60-period moving averages, with all moving averages exerting downward pressure and confirming a clear bearish trend. The MACD death cross persisted on daily charts, with DIFF below DEA and green bars maintained, signalling that bearish momentum was still being released.
Macroeconomic headwinds weighed heavily on market sentiment. US nonfarm payrolls rose by only 29,000 in September, far below market expectations, which rapidly cooled bets on a Federal Reserve rate hike in October. However, escalating geopolitical conflicts in the Middle East pushed Brent crude back above USD 100 per barrel, while surging AI-related bond issuance kept US Treasury yields climbing, casting a persistent shadow of stagflation concerns over global financial markets.
According to CME FedWatch data, the probability of the Fed keeping rates unchanged through October stood at 80.6 percent, with only a 19.4 percent chance of a cumulative 25 basis point hike. Looking further ahead, the probability of rates remaining unchanged through December dropped to 21.7 percent, with 64.1 percent probability of a cumulative 25 basis point hike and 14.2 percent probability of a cumulative 50 basis point hike. The US services sector showed mixed signals.
The ISM services PMI fell to 54.9 in September, indicating slowing services expansion, but the prices index jumped to 74.0, a four-year high, reflecting rebounding cost pressures. Meanwhile, the US Labor Department's employment report showed nonfarm payrolls increased by only 29,000 in September, with August payrolls revised downward to 133,000. On the demand side, China's downstream aluminium sector presented a complicated picture.
While downstream demand recovered somewhat month-on-month in September, processing fees for some processed products came under pressure, prompting production cuts or halts at certain downstream enterprises. Purchase willingness for liquid aluminium subsequently weakened, dragging down the proportion of liquid aluminium output. The liquid aluminium share fell 0.5 percentage points month-on-month to 78.2 percent, below initial expectations, with main reductions coming from central China and south-west China regions.
Based on SMM liquid aluminium proportion data, China's aluminium casting ingot output fell 6.2 percent year-on-year and 0.8 percent month-on-month in September. Entering October, affected by the National Day holiday, some downstream enterprises implemented temporary production cuts or halts. The liquid aluminium proportion was expected to fall a further 0.3 percentage points to 77.9 percent, while processing fees for downstream products still faced downside risks and liquid aluminium demand remained under downward pressure.
On the inventory front, domestic aluminium ingot social inventory built up by 48,000 tonnes compared with the Wednesday before the holiday. The operating rate of leading aluminium downstream processing enterprises in China fell 1.6 percentage points week-on-week to 60.5 percent during the week, affected by centralised maintenance, production halts, and load reductions during the National Day holiday. In the primary aluminium spot market, trading sentiment remained sluggish on the last working day before the National Day holiday.
In central China, SMM A00 aluminium ingot spot premiums mainly traded at premiums of RMB 30-50 per tonne to the SHFE contract, though some suppliers maintained high premium quotes with limited actual transactions. Sellers willing to move cargo showed little inclination to hold prices firm, with actual transaction prices centring around discounts of RMB 40-70 per tonne against the SHFE aluminium October contract. South China's spot market remained weak, with the SHFE aluminium backwardation structure strengthening as next-month and forward-month premiums actually elevated.
Strong willingness to cash out before the holiday amid high spot-futures price spreads prompted quotes to shift quickly from holding firm to lowering prices to stimulate shipments. On the demand side, buying was largely dormant, with only sporadic bargain-hunting restocking and procurement demand nearly exiting the market. Spot transaction prices concentrated at premiums of RMB 240-280 per tonne against the SHFE aluminium 2610 contract.
In the aluminium scrap market, SMM A00 aluminium closed at RMB 24,030 per tonne on September 30, down RMB 80 per tonne from the previous trading day, while the aluminium scrap market fell between RMB 0-100 per tonne, with some regions choosing to hold steady and wait and see before the holiday. Imported shredded aluminium prices at Ningbo Port and Tianjin Port were recorded at RMB 21,470 per tonne and RMB 21,520 per tonne respectively (tax inclusive). Large downstream secondary aluminium enterprises mostly did not halt production over the National Day holiday, with pre-holiday stockpiling completed at a normal pace.
Following the National Day holiday, the aluminium scrap market continued to hold up well. On the supply side, aluminium scrap yards were expected to gradually resume operations after a brief 3-5 day holiday with increased cargo releases expected, though recycling policy constraints on circulation and tight invoice supply situation remained unchanged. On the demand side, as the traditional peak consumption season for cast aluminium alloy gradually kicks in, enterprises accelerated order-taking and procurement pace, with aluminium tense scrap prices expected to find stronger support amid tight supply and demand.
Demand for wrought aluminium alloy remained moderate with relatively ample in-factory inventory, though tax audit restrictions reduced expected aluminium scrap supply, setting the stage for gradual price uptrend. However, the release of peak-season demand remained relatively mild, requiring close tracking of actual post-holiday order fulfilment. The secondary aluminium alloy market showed stability on September 30.
The SMM ADC12 price held steady at RMB 24,500 per tonne from the previous trading day. Although aluminium prices pulled back during the week, aluminium scrap prices followed down only to a limited extent. After stricter enforcement of policies such as tax invoices, compliant raw material procurement costs for some enterprises remained at a relatively high level, providing cost-side support for ADC12 prices.
On the demand side, downstream stockpiling before the holiday was generally cautious, dominated by rigid demand with no clear concentrated restocking. The market showed a pronounced wait-and-see pattern in the short term, with enterprises generally choosing to keep prices stable before the holiday. Looking ahead, analysts expect continued consolidation.
On the macro front, high US Treasury yields and a strong US dollar continued to weigh on valuations in the nonferrous metals sector, while expectations for US Fed interest rate hikes within the year repeatedly disturb market sentiment. On the industry front, domestic aluminium ingot inventory buildup after the holiday weakened price support, coupled with weaker demand for liquid aluminium and a rebound in casting ingot volumes. Adjustments in fund open interest around the long holiday intensified the tug-of-war between longs and shorts in the market.
Overall, bullish and bearish factors remain intertwined for aluminium prices in the short term, with prices expected to consolidate on a weak note.
Source: alcircle.com