Last week, the aluminum complex traded in a volatile range as macro headwinds clashed with underlying industry support, with a sudden surge in Federal Reserve rate hike expectations emerging as the dominant force steering the market. At the same time, escalating conflict in the Middle East injected an additional supply-side risk premium into aluminum prices.

The most striking development this week was the shift in the macro landscape. The U.S. Producer Price Index rose 5.4% year-on-year in August, surpassing forecasts, while the core Consumer Price Index also climbed more than expected on a monthly basis, signaling a broad rebound in inflationary pressure. Following the data release, market pricing for a Fed rate hike next week jumped to roughly 90% from around 70% a week earlier, with traders fully pricing in at least two quarter-point increases. Adding to the hawkish tone, the Fed Chair's debut at the Jackson Hole symposium delivered an unambiguous signal of tighter policy ahead. The dollar index and Treasury yields strengthened in tandem, weighing on the broader non-ferrous metals complex and forcing aluminum prices to retreat after an early-week rally.

Geopolitical frictions, however, cushioned some of those macro losses. The U.S. military intensified its naval blockade operations against Iran, with reports indicating that 94 commercial vessels had been redirected and three rendered inoperative. Iran, in response, announced the designation of a "no-go zone" in the Strait of Hormuz, escalating the standoff over transit rules. Brent crude climbed back above $100 per barrel for the first time since July, while oil flows through the strategic waterway plummeted from roughly 8 million barrels per day in the last week of August to about 1 million barrels this week. This renewed tension has also cast fresh doubt over the timeline for restarting aluminum smelting capacity in the Middle East, adding a geopolitical premium back into supply expectations.

Alumina was the weakest of the three aluminum-linked contracts, easing throughout the week. As of the September 11 close, the main alumina futures contract settled at 2,697 yuan per tonne, down roughly 3.5% week-on-week. Physical market quotes diverged across regions, with Shanxi at 2,700 yuan, Henan at 2,710 yuan, Shandong at 2,675 yuan, and Guangxi lower at 2,605 yuan per tonne, while imported alumina FOB pricing stood at $349 per tonne. Supply-side pressure intensified, with national installed alumina capacity reaching 120.72 million tonnes and operating capacity rising 200,000 tonnes week-on-week to 99.45 million tonnes, pushing utilization rates up to 81.39%. New capacity in Guangxi continued to ramp up, while previously idled producers in Shanxi affected by red mud repository issues gradually resumed operations. The domestic oversupply condition remains fundamentally unchanged. Inventory burdens also kept building, with national alumina inventories rising to 6.706 million tonnes, up 45,000 tonnes week-on-week. Of that, smelter raw material stocks increased 36,000 tonnes to 4.063 million tonnes, while combined platform and port inventories rose 53,000 tonnes to 1.731 million tonnes. Finished goods held at plants stood steady at 300,000 tonnes, with warrant inventories near 277,000 tonnes. Cost dynamics deserve close attention—Guinean bauxite was quoted at $72 per dry tonne at the mine gate, but freight rates have surged to $42 per tonne, rising notably on the week. Based on imported ore pricing, marginal high-cost producers now face a full production cost of 3,006 yuan per tonne, translating to a loss of roughly 306 yuan per tonne. Domestic ore users fare slightly better at a full cost of around 2,767 yuan per tonne, with losses near 67 yuan. The sustained climb in ocean freight has already begun to impact shipment volumes of Guinean bauxite, and the floor under ore prices now appears largely confirmed, strengthening cost-side support for alumina prices. In sum, while the domestic oversupply problem for alumina is unlikely to be resolved quickly, the clarity of cost support is improving, leaving limited room for further significant downside. Prices are expected to consolidate at lower levels within a 2,600 to 2,750 yuan range in the near term, with freight cost pass-through into landed ore prices a key factor to monitor.

SHFE aluminum rallied early in the week before giving back gains, leaving the overall center of gravity slightly lower than the previous week. At the September 11 close, the main SHFE aluminum contract (2610) settled at 24,235 yuan per tonne, essentially flat on the week. The Changjiang spot A00 aluminum average was quoted at 24,240 yuan per tonne, with spot trading at a premium of about 10 yuan to the front-month contract. Inventory draws continued but at a slowing pace. According to Mysteel data, social inventories of aluminum in major Chinese regions fell to 768,000 tonnes by September 10, down 6,000 tonnes from the prior weekend, then eased further to 749,000 tonnes by September 14, a reduction of 19,000 tonnes week-on-week. Under the SMM methodology, aluminum ingot social stocks stood at 796,000 tonnes, with weekly draws of 19,000 tonnes. While inventories have retreated below 800,000 tonnes, they remain at a neutral-to-elevated level relative to historical norms for this time of year, still higher than year-ago levels. Overseas, LME aluminum inventories have dropped to a historically extreme low of 244,000 tonnes, with cancelled warrants maintaining a high proportion and the Cash/3M structure exhibiting a firm premium, underscoring continued tightness in the overseas physical market. On the supply side, domestic installed aluminum smelting capacity stood at 45.77 million tonnes with operating capacity at 45.48 million tonnes, unchanged week-on-week, keeping utilization at an exceptionally high 98.03%. The molten aluminum ratio remained elevated near 78.9%, keeping marketable ingot supply tight and leaving virtually no room for domestic capacity expansion. Overseas, about 25% of the 1,262 electrolytic cells at the Al Taweelah smelter in the UAE had restarted, accelerating the pace of resumption, though escalating Middle East tensions could delay further progress. On the demand side, utilization among downstream aluminum fabricators ticked up 0.8 percentage points to 61.0%, as early signs of the seasonal peak begin to emerge, albeit with modest intensity. Aluminum rod inventories rose counter-seasonally by 11,000 tonnes to 153,000 tonnes, indicating that end-user uptake remains incomplete despite improving processing fees. Overall, domestic social stock draws, historically low LME inventories, and Middle East geopolitical risk premiums combine to provide solid underlying support for SHFE aluminum. However, the sharp repricing of Fed rate hike expectations, expectations of looser overseas supply from capacity restarts, and weak seasonal demand realization all cap the upside. Prices are expected to trade within a 23,800 to 24,500 yuan range in the near term, with macro sentiment and geopolitical developments serving as the key directional catalysts.

Cast aluminum alloy followed primary aluminum's pattern last week, spiking early before weakening steadily through the session's remainder. By the September 11 close, the main cast alloy contract settled at 23,415 yuan per tonne, down roughly 1% on the week. In the physical market, the SMM ADC12 average was quoted at 23,300 yuan per tonne, while Jiangxi Baotai listed ADC12 at 23,700 yuan. The theoretical spot premium to the main contract stood at approximately 625 to 770 yuan per tonne, keeping the futures-spread at a wide level. Cost remains the core support—scrap aluminum supply stayed tight, with the structural shortage of compliant, invoiced material persisting. Imported scrap additions remain limited, keeping scrap prices firm and imposing a rigid cost constraint on secondary aluminum producers. On the supply side, utilization rates among secondary alloy producers ticked up marginally, but output growth remains constrained by raw material scarcity and squeezed margins. Supply-side recovery continues to outpace the pace of destocking at the end-user level. A noteworthy inventory signal has emerged—domestic social inventories of cast aluminum alloy ingots rose to 34,100 tonnes, up 1,100 tonnes from the previous week, marking a fifth consecutive weekly accumulation. The persistent build in plant-level inventories reflects weakening downstream orders and sluggish offtake, leaving producers with an involuntary rise in stockpiles. Demand remains soft, with die-casting enterprises in the traditional seasonal peak finding few signs of the usual strength. New orders from automotive parts and general-purpose products are growing only modestly, with buyers sticking to essential procurement and showing limited appetite for high-priced material. In summary, high scrap costs and weeks of rising social inventories have created a sharp bull-bear standoff. Cost support limits the downside, while persistent inventory builds and weak end-demand realization cap the upside. Cast aluminum alloy is expected to move in tandem with primary aluminum within a 23,000 to 23,800 yuan range in the coming sessions.

Looking at the broader picture, the core contradictions facing the three aluminum products diverge: alumina pivots on the balance between a domestically oversupplied market and rising cost support from freight-boosted ore prices; SHFE aluminum reflects the tug-of-war between low domestic and overseas inventories, geopolitical supply premiums, rising Fed rate hike expectations, and the strength of seasonal demand delivery; and cast alloy is driven by the standoff between firm scrap costs and repeated inventory builds amid a lackluster seasonal demand window. Going forward, close attention should be paid to the actual outcome of the September FOMC meeting, the real-world impact of U.S.-Iran tensions on Strait of Hormuz transit and Middle East smelter restarts, the durability of domestic social inventory draws, and the actual strength of "golden September, silver October" seasonal demand.

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