A volatile outlook for overseas copper tariff policies in early September 2026 became the core trigger for the collective pullback across the non-ferrous metals sector. With the White House yet to announce a final decision on copper tariffs, persistent policy uncertainty continues to weigh on market sentiment. A sharp decline in LME copper dragged down overseas base metals across the board, with LME aluminum following suit and posting an intraday retracement of up to 1.5% at its peak. Dragged lower by external markets, the SHFE aluminum came under pressure.
Overall, this round of aluminum price declines is purely the result of external sentiment spillover, with no material bearish developments in the domestic aluminum fundamentals. After the rapid sentiment washout, the domestic spot market exhibited a "first dip, then rebound" pattern characterized by concentrated pricing execution, bargain-hunting restocking at lower levels, peak-season fundamental support, and regional structural divergence.
The sharp plunge in futures triggered concentrated settlement of back-pricing orders, rapidly repairing market pessimism. Domestic long-term aluminum trade predominantly adopts a back-pricing model; during the previous phase of aluminum price hike, a large volume of unexercised orders had accumulated in the market. This rapid pullback in futures directly opened a window for downstream buyers to lock in prices at lower levels, triggering industry-wide concentrated exercise.
According to feedback from mainstream market traders, the overnight trading sessions on September 10-11 were marked by severe volatility, ushering in a phase of peak pricing activity. Downstream enterprises rushed to lock in procurement costs at lower price levels, quickly digesting the accumulated spot market uncertainty. As the futures market stabilized and began to recover on September 11, spot quotations returned to rationality and an emotional foundation was laid for the recovery in physical transaction volumes.
Prices falling below value activated bargain-hunting restocking, with national spot transaction volume warming up noticeably month-on-month. After aluminum prices quickly retreated to psychologically attractive lower levels for downstream buyers, the market trading logic shifted from cautious waiting to bargain-hunting restocking, resulting in a significant increase in national spot shipments.
As the core national spot distribution hub, the Wuxi market saw a substantial rise in trading activity, with smooth shipments from traders. Leading traders achieved single-day shipments on the scale of thousands of tonnes, and downstream willingness to buy the dip clearly picked up. Inland markets recovered in tandem, with spot prices showing greater resilience in regions facing tighter supply.
Peak-season fundamentals in "Golden September" continued to provide a floor, with a high-molten-aluminum and destocking pattern reinforcing price support. Entering the traditional peak consumption season, orders from end-use sectors such as aluminum rod, die-casting, power grids, and new energy steadily recovered, driving a sustained pickup in downstream processing operating rates and a steady rise in rigid demand support.
The third quarter is inherently a period of high molten aluminum ratios for the year; the recovery in peak-season demand further supported aluminum plants in maintaining high molten aluminum conversion rates. Affected by this high molten aluminum production structure, domestic aluminum ingot traders' inventories continued to destock in early September, fully confirming the current spot structure of reduced ingot casting and strengthening rigid demand. This effectively offset external macro sentiment headwinds and formed strong support for the bottom of aluminum prices.
Cargo flow restructuring exacerbated regional divergence, with the "strong south, weak north" pattern poised for medium-to-long-term continuation. The current domestic supply-side landscape has continued to adjust. Several new aluminum capacity additions in the northwest are gradually coming online, but regional deep-processing facilities are simultaneously improving, reducing the proportion of aluminum ingots sold externally. Concurrently, the execution volume of long-term contracts in some regions has contracted, intensifying cross-regional cargo diversion and further exacerbating divergence in regional spot basis spreads.
At present, the domestic aluminum market exhibits a structural feature of extreme strength in South China, relative weakness in Central China, and equilibrium in East China. The East China Wuxi market has ample supply circulation and relatively balanced supply-demand dynamics, with spot premiums/discounts fluctuating flexibly around parity following the futures market. The South China spot market has been the most resilient, with Foshan A00 aluminum premiums rising to Yuan 200/tonne, highlighting a tight spot situation.
The core reason is South China's heavy reliance on aluminum ingot transfers from the southwest; as deep-processing capacity in the southwest continues to come online, local molten aluminum conversion rises, and externally sold aluminum ingot resources keep shrinking, continuously driving up South China premiums. In contrast, the Central China market continuously absorbs aluminum ingots flowing out from the northwest, resulting in relatively ample supply, with premiums/discounts running in the range of Yuan 120-150/tonne discount. As deep-processing capacity in these major regions continues to be deployed and aluminum ingot sales reductions become normalized, the domestic aluminum market's regional divergence pattern of "strong south, weak north, and stable east" will persist long-term.
In summary, this round of plummeting aluminum prices constitutes a typical external market sentiment overreaction, diverging from domestic real supply-demand fundamentals. In the "Golden September" peak season, end-use demand is steadily recovering, aluminum plants are operating with high aluminum water ratios, and traders' inventories continue to destock. Multiple fundamental factors support the bottom range of aluminum prices, driving futures sentiment repair and a rebound in spot bargain-hunting restocking.
In the short term, repeated disruptions from overseas tariff policies will continue to suppress futures market elasticity, leading to high price volatility; however, domestic spot resilience is ample, leaving limited room for a substantial downward move.
Written by Regina WANG
wangjiaqie@mysteel.com
