Middle East Situation Volatile and Uncertain, Aluminum Prices Consolidate and Adjust [SMM Aluminum Morning Meeting Summary]

7.21 SMM Aluminum Morning Meeting Minutes

Futures: SHFE aluminum closed at 23,030 yuan/mt, down 0.78%. The price was below all key moving averages (MA5=23,035, MA10=23,135, MA30=23,359.83, MA60=23,399.08). The moving-average system was in a bearish alignment, and the weak pattern continued. MACD indicators showed DIF=-196.09 and DEA=-260.78; the golden cross remained, but the histogram narrowed sharply to 129.39 (181.64 the previous day), indicating a rapid fade in bullish momentum and insufficient rebound strength. Trading volume expanded to 91,400 lots, but overall remained at a low level, with market divergence increasing somewhat. The suggested core operating range for SHFE aluminum is 22,800-23,300. LME aluminum closed at $3,138.5/mt, edging up 0.08%. The price was below all key moving averages (MA5=3,154.2, MA10=3,158.85, MA30=3,233.43, MA60=3,417.72). The moving averages were in a bearish alignment, and weakness continued. MACD indicators showed DIF=-62.31 and DEA=-78.14; the golden cross remained, but the histogram narrowed to 31.66 (38.31 the previous day), with bullish momentum weakening. The suggested core operating range for LME aluminum is 3,100-3,160.

Macro front: The US military launched a new round of strikes against Iran. US President Trump posted on social media, hinting that the US military would launch tough retaliatory actions against Iran after casualties occurred in recent days. Iran’s Islamic Revolutionary Guard Corps said it carried out three-stage strikes on US military targets in Bahrain and Kuwait. A senior Iranian source said mediators had proposed a 10-day ceasefire to discuss a plan to revive a temporary agreement between Iran and the US. Iranian Foreign Ministry spokesperson Baghaei confirmed receipt of the mediators’ proposal, saying whether talks could be held with the US would depend on whether the negotiations align with Iran’s national interests.

Fundamentals: Supply side, last week the proportion of liquid aluminum in China rose 0.37 percentage points MoM, mainly because aluminum billet processing fees performed well, lifting the share of direct supply of liquid aluminum, while aluminum ingot casting ingot output further contracted; outside China, amid continued progress in ramp-up production of newly commissioned projects and resume production projects, aluminum supply was expected to keep increasing. Overall, however, the short-term global aluminum ingot destocking trend was expected to be difficult to reverse. Demand side, downstream processing sectors were in the traditional consumption off-season, with mixed performance across segments but mainly under pressure; the operating rate of leading downstream aluminum processing enterprises was 61.3%, down 0.6 percentage points MoM. As the SHFE/LME price ratio repaired, downstream export profits narrowed; with orders on hand being digested, exports were expected to provide weaker support to demand. Inventory side, this week China’s aluminum social inventory continued the destocking trend. As of this Monday, China’s aluminum ingot social inventory fell 2,000 mt from last Thursday to 1.022 million mt, down 25,000 mt from last Monday.

Primary Aluminum Market: The morning session saw the SHFE aluminum 2606 contract trading center higher than the same period in the previous trading day. Influenced by the aluminum ingot supply side, some sellers held their offers firm. However, affected by the off-season, market purchasing sentiment remained weak, coupled with still ample circulating supply. Transaction prices kept moving lower, with mainstream deals shifting from parity against the SHFE aluminum 08 contract to a discount of 20 yuan/mt. Today, the selling sentiment index in east China was 3.16, up 0.05 from the previous trading day; the purchasing sentiment index was 2.92, up 0.02. Today, aluminum futures rose amid disturbance from some market news, but the downstream processing enterprises in central China showed subdued purchasing sentiment, which significantly depressed the market transaction sentiment; however, suppliers demonstrated a clear willingness to hold prices firm, and the market offers were relatively high. After the opening, as absolute prices rose again, traders adjusted their offers downward, and finally, the actual transaction prices in central China were in the range of a discount of 120-150 yuan/mt against the SHFE aluminum 08 contract. Today, the selling sentiment index in central China was 3.03, up 0.04 from the previous trading day; the purchasing sentiment index was 3.00, down 0.03.

Secondary Aluminum: Today, the SMM A00 spot aluminum price closed at 23,190 yuan/mt, edging down 30 yuan/mt from the previous trading day, while the aluminum scrap market remained stable overall. On the price difference front, on July 20, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 2,012 yuan/mt, while that between A00 aluminum and shredded aluminum tense scrap was 698 yuan/mt, still at extremely low levels. Supply side, constraints kept deepening, the impact of the reverse invoicing policy was further intensifying, and the scarcity of compliant invoiced aluminum scrap kept rising. In terms of imports, China’s aluminum scrap imports in June 2026 were approximately 133,000 mt, down 16.9% YoY and 12.5% MoM, declining for three consecutive months. In the 2026 from January to June, total imports amounted to 982,000 mt. As overseas aluminum scrap offers kept pulling back, Guangdong province saw an increase in orders for aluminum scrap imports from Southeast Asia recently compared to before, and the import window further improved from earlier. However, new transactions were still mainly concentrated in some low-priced resources and long-term cooperative clients, and spot market trading activity remained limited. The aluminum scrap market is expected to continue moving sideways at high levels. Supply side, the constraints from the reverse invoicing policy are hard to reverse in the short term, and the tightness in invoiced aluminum scrap will persist; import side, the combined effect of multiple bearish factors will gradually show in the coming months, and the replenishment of high-quality scrap from outside China will remain low. Demand side, with the deepening off-season, downstream operating rates stayed low, end-user orders were hard to see substantial improvement, and scrap utilization enterprises continued to purchase as needed, making it difficult for purchasing sentiment to notably improve. The price difference between A00 aluminum and aluminum scrap has narrowed to historical lows, significantly weakening the cost advantage of aluminum scrap over primary aluminum. If aluminum prices continue to fall, the substitution effect will accelerate and become more prominent.

Secondary Aluminum Alloy: Spot Market: The ADC12 market remained generally stable today, with the SMM ADC12 price unchanged from the previous trading day at 24,100 yuan/mt. The secondary aluminum alloy market remained in its off-season, with limited release of downstream orders, end-user procurement staying at just-in-time levels, and overall subdued trading activity, providing insufficient demand-side support for price rises. Meanwhile, aluminum prices moved sideways, aluminum scrap prices saw limited fluctuations, and the cost side showed no notable changes, offering similarly weak drivers for enterprise price adjustments. Under a supply-demand balance where both sides were weak, the market lacked new directional factors, and enterprises mostly adopted strategies of aligning with market conditions and maintaining stable prices for shipments. Given that aluminum scrap supply remained relatively tight, cost support persisted, and a demand recovery still awaited the arrival of the traditional peak season, the ADC12 market is expected to maintain narrow-range consolidation in the short term, with prices staying largely stable, while future focus should be on aluminum price trends, aluminum scrap availability, and the pace of downstream order recovery.

Comprehensive Outlook: Amid ongoing fluctuations in the Middle East situation, lingering market concerns over interest rate hikes, sustained supply recovery, and a destocking trend that is hard to reverse in the short term, aluminum prices are expected to consolidate with fluctuations in the near term amid a tug-of-war between longs and shorts. Future focus should be on the pace of Middle East production resumptions and the trajectory of geopolitical conflicts, LME aluminum ingot inventory changes, and the state of downstream processing orders in China.

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