7.27 SMM Aluminum Morning Briefing
Futures:In the night session on July 24, the most-traded SHFE aluminum contract opened at 23,195 yuan/mt, reached a high of 23,220 yuan/mt and a low of 23,105 yuan/mt, and finally closed at 23,205 yuan/mt, down 0.09% from the previous settlement. During this period, after rebounding, prices consolidated at highs and closed with a small bearish candlestick. Prices moved within the short-term dense moving average range of MA5 (23,232.43), MA10 (23,220.90), MA20 (23,186.42), and MA40 (23,221.95). The moving average system formed bottom support, with only pressure above from the medium and long-term MA60 (23,345.74). The stage low of 22,875 provided solid support, and consolidation characteristics after the rebound were evident. Trading volume in this period was 50,900 lots, significantly contracted from before, while open interest was 253,000 lots, edging up by 445 lots. The futures showed slight signs of bearish position building, but fund strength was relatively weak. From a technical perspective, the 4-hour MACD indicator's DIFF (28.68) was above DEA (17.47), persisting the golden cross structure. The red histogram (STICK) value was 22.42, with bullish momentum slightly contracting but the trend not reversed. On July 24, LME aluminum opened at $3,189.0/mt, hit a high of $3,189.5/mt and a low of $3,149.5/mt, and closed at $3,165.0/mt, down 0.78% from the previous settlement. During this session, prices rebounded to hit highs, then pulled back under pressure and closed with a small bearish candlestick. Prices fell below the short-term moving averages MA5 (3,173.21) and MA10 (3,168.82). Above, the medium and long-term moving averages MA20 (3,187.07), MA40 (3,262.70), and MA60 (3,305.75) were in a bearish alignment, exerting pressure. The stage low of 3,040 provided solid support, and the market entered a consolidation and resting phase after the rebound. Trading volume was 13,383 lots, slightly contracted from before, while open interest was 593,000 lots, up by 2,140 lots. The futures showed slight signs of bearish position building, with weak selling pressure. From a technical perspective, the daily MACD indicator's DIFF (-44.58) was running above DEA (-63.23), persisting the golden cross structure. The red histogram (STICK) value was 37.30, with bullish momentum marginally weakening but not reversed. Short-term, the focus was on high-level consolidation with pullbacks, and the risk of a unilateral decline was limited.
Macro Front:Foreign Ministry Spokesperson Lin Jian, at a regular press conference, stated that China's position on China-US economic and trade issues is consistent and clear, opposing all forms of unilateral tariff measures, and that tariff wars and trade wars are in no one's interest. According to CME's "FedWatch," the US Fed's probabilities for July were no change (62.1%) and a cumulative 25 bps hike (37.9%). For September, the probabilities were no change (15.1%), a 25 bps hike (56.2%), and a 50 bps hike (28.7%).
Fundamentals: The spot aluminum ingot market outside China was broadly under pressure and declined last week, with the average transaction price in major Asian trading regions falling sharply WoW. The downstream sector entered the traditional consumption off-season, and purchasing sentiment stayed sluggish. Coupled with inventory buildup among some traders and rising capital pressure, low-priced sell-offs increased, market price quotes diverged significantly, and the spot price center continued to loosen. In the short term, there were no signs of improvement in Asia's downstream off-season conditions. Just-in-time procurement by end-users was unlikely to see a volume increase, and traders remained in an inventory clearing cycle. As a result, spot premiums for aluminum ingot outside China stayed in the doldrums. Future attention should focus on the pace of downstream recovery, new long-term contract signings, and the progress of trader destocking. If demand remains sluggish, regional spot prices still have room to edge lower. Inventory side, on Monday this week, aluminum ingot inventory in major domestic consumption areas stood at 979,000 mt, destocking by 27,000 mt from last Thursday and by 43,000 mt from last Monday.
Primary Aluminum Market: In early trading, the SHFE aluminum 2606 contract's price center ran lower than the same period of the previous trading day. Driven by pre-weekend stockpiling and lower aluminum prices, market purchasing sentiment rose, but due to ample circulating supply, price acceptance only edged up slightly. Mainstream transaction prices settled at a discount of 10 yuan/mt to a premium of 10 yuan/mt against the SHFE aluminum 08 contract. In east China today, the selling sentiment index stood at 3.13, flat MoM, while the purchasing sentiment index was 2.94, up 0.03 MoM. Today, futures edged down, coinciding with pre-weekend stockpiling and the last long-term contract delivery day of the month. In the central China market, traders purchased heavily to fulfill long-term contracts, and stockpiling sentiment among downstream processing enterprises recovered slightly. This led suppliers to hold their shipment quotes high, displaying a strong willingness to hold prices firm and hold back from selling conditions. Ultimately, the actual transaction price range in the central China market centered around a discount of 100-120 yuan/mt against the SHFE aluminum 08 contract. In central China today, the selling sentiment index was 3.10, up 0.01 MoM, and the purchasing sentiment index was 2.96, up 0.08 MoM.
Aluminum Scrap: Today, SMM's A00 spot aluminum price closed at 23,200 yuan/mt, edging down 60 yuan/mt from the previous trading day, while the overall aluminum scrap market remained stable. Regarding price differences between A00 aluminum and aluminum scrap, on July 24, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was around 2,030 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was around 710 yuan/mt, both continuing to run at historically low levels. In import news, according to customs data, China's aluminum scrap imports totaled 132,800 mt in June 2026, marking the third consecutive month of decline from May's 152,000 mt. Looking at cumulative 2026 data, total aluminum scrap imports from January to June reached 981,800 mt. Recently, orders from Southeast Asia to the Guangdong region increased; although the import window improved compared to earlier periods, new transactions were mostly concentrated in low-priced resources, and overall spot market activity remained limited. Affected by the UAE's aluminum scrap export ban and the EU's tariff hike policy, the tightening effect on high-quality imported aluminum scrap supply will become more evident in the future. The aluminum scrap market is expected to continue the narrow consolidation pattern next week, with demand suppressing and costs providing a floor. As the off-season deepens, end-use orders from downstream are unlikely to see substantial improvement. Scrap utilization enterprises continue their procurement strategy of purchasing as needed, and the procurement atmosphere is difficult to see significant improvement. The mainstream trading range for shredded aluminum tense scrap (priced based on aluminum content) is expected to be around 19,800-20,500 yuan/mt. Currently, the price difference between A00 aluminum and aluminum scrap has narrowed to a historic low, significantly weakening the economic advantage of aluminum scrap over primary aluminum. If primary aluminum prices continue to decline thereafter, the substitution effect of primary aluminum for aluminum scrap will accelerate and become evident, necessitating close attention to the crowding-out effect of aluminum price movements on aluminum scrap demand.
Secondary Aluminum Alloy: In the spot market: Today, ADC12 market quotes largely continued to hold steady, with a general lack of willingness to adjust prices across the industry. From the driving factors, although the cost side provided some bottom support for prices, end-use demand was sluggish, downstream procurement pace slowed down, and the wait-and-see sentiment heightened by a slight pullback in aluminum prices collectively capped the upside room. Under the current mixed pattern of bullish and bearish factors, most producers chose to hold prices steady and wait, resulting in a relatively sluggish market trading atmosphere. In the short term, the ADC12 market is expected to continue operating in a narrow consolidation. Going forward, close attention should be paid to changes in aluminum scrap costs, primary aluminum price trends, and improvement in end-use orders.
Comprehensive Outlook: Recently, macro sentiment has seen a slight improvement. The persistent geopolitical risk premium in the Middle East and the continued destocking of aluminum ingots in China are jointly providing a floor for aluminum prices. However, the continued commissioning of overseas aluminum capacity in the long term, weak traditional end-use demand in China, and recurring macro-level uncertainties are exerting significant pressure on the upside room for aluminum prices. In the short term, aluminum prices are expected to maintain a consolidation pattern.
[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions prudently and not substitute this for independent judgment. Any decisions made by clients have no connection with SMM.]
