SHFE Aluminum Moves Sideways on Position Reduction, Alumina Inventory Buildup Under Pressure, Medium-Term Downtrend Unchanged [SMM Aluminum Futures Brief Review]

SMM, July 27:

The most-traded SHFE aluminum 2609 contract closed at 23,195 yuan/mt today, down 25 yuan for a 0.11% decline. Trading volume stood at 133,450 lots, with open interest at 251,167 lots, a daily decrease of 1,858 lots as open interest edged lower, reflecting signs of minor position squaring by both bulls and bears. Prices traded below the 5-day and 10-day moving averages, and settled beneath the 30-day and 60-day moving averages, with short-term moving averages forming a bearish alignment. After a sharp decline earlier, the price consolidated at lows and attempted a recovery, retreating after a rapid rise intraday with narrowing fluctuations, while bullish buying interest at lows stayed lukewarm. The 5-day and 10-day moving averages turned downward, and the 30-day and 60-day moving averages also drifted lower in tandem, leaving the medium-term downtrend intact. Multiple moving averages overhead posed stiff resistance, persistently capping rebound room, while some short-term support held at lower levels. DIF and DEA remained below the zero axis, bearish momentum had yet to fully fade, and overall downward pressure persisted.

SMM commentary: Macro sentiment improved slightly recently. Rising Middle East geopolitical risk premium alongside continuous destocking of domestic aluminum ingot jointly cushioned aluminum prices. However, sustained capacity additions for aluminum outside China over the long term, weak end-use demand in China, and recurring macro uncertainties kept notable pressure on aluminum’s upside room. In the near term, aluminum prices maintained a consolidation pattern.

The most-traded alumina 2609 contract closed at 2,687 yuan/mt today, down 12 yuan for a 0.44% decline. Trading volume reached 219,600 lots, with open interest at 296,584 lots, a MoM increase of 281 lots, as small amounts of capital entered. Prices stayed below the 5-day, 10-day, 30-day, and 60-day moving averages, with these moving averages aligned in bearish formation from top to bottom. Bears kept up pressure in the short term, pushing prices to move sideways and drift lower, while bullish buying interest at lows remained weak. Medium-to-long-term moving averages all shifted from support to resistance levels, the medium-term drift lower remained unchanged, and the price recovery phase continued to face layered resistance from each moving average across periods.

SMM commentary: Supply side, weekly production stayed basically flat WoW and ran steadily, but the loose supply pattern persisted, continuously weighing on prices. Inventory-wise, total alumina inventory nationwide rose 24,000 mt MoM to 7.028 million mt, extending the inventory buildup trend. Markets outside China, earlier low-priced cargoes flowed heavily into China amid geopolitical disruptions, draining circulating inventory abroad. Recently, stockpiling demand tied to new capacity in Indonesia and restocking demand from production resumptions in the Middle East were released in concentrated fashion, tightening spot cargo overseas and driving a notable increase in overseas alumina prices. Looking ahead, in the absence of bullish macro catalysts domestically and with the oversupply pattern continuing to weigh, near-term prices are expected to remain in the doldrums. Coupled with production ramp-up expectations in Guangxi, inventory is likely to continue building next week.

[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make prudent decisions and not rely on this as a substitute for independent judgment. All decisions made by clients are unrelated to Shanghai Metals Market.]