7.31 SMM Aluminum Morning Meeting Minutes
Futures: The most-traded SHFE aluminum contract opened at 23,650 yuan/mt in the night session on July 30, with a high of 23,725 yuan/mt, a low of 23,630 yuan/mt, and finally settled at 23,720 yuan/mt, up 0.40% from the previous close. During this period, prices consolidated higher and closed with a bullish candlestick, holding firmly above the MA5 (23,587.56), MA10 (23,462.56), MA20 (23,346.68), MA40 (23,297.85), and MA60 (23,371.70) moving averages, which formed strong support and drove the price center continuously higher. Open interest edged down during this period, continuing the pattern of bearish position reduction, with the price rise fueled by bear exits. Technically, on the 4-hour MACD, the DIFF (109.33) remained above the DEA (60.99), and the histogram continued expanding, indicating ample short-term bullish momentum. On July 30, LME aluminum opened at $3,181.0/mt, with a high of $3,211.5/mt, a low of $3,171.5/mt, and finally settled at $3,193.0/mt, up 0.52% from the previous close. The price extended its low-level consolidation and recovery, closing with a small bullish candlestick, holding above the short-term MA5 (3,178.34) and MA10 (3,172.71), and testing the MA20 (3,182.56) resistance, while the medium and long-term MA40 and MA60 still capped the upside. Trading volume edged up slightly on the day, while open interest declined notably, mainly from bearish position reduction, with bulls showing limited initiative to buy. Technically, on the daily MACD, the DIFF (-31.41) was above the DEA (-47.23), and the histogram expanded slightly, as the low-level recovery continued, but the rebound height was constrained by the medium and long-term moving averages.
Macro front: US economic growth slowed more than expected in Q2, but robust consumption and business investment showed resilient domestic demand. Preliminary data from the US Bureau of Economic Analysis released on Thursday indicated that Q2 real GDP grew at an annualized rate of 1.5%, below market expectations. A decline in net exports weighed on the overall figure, but consumer spending and business investment remained strong, partially offsetting external pressures. Data from the US government on Thursday showed the June PCE price index fell 0.1% MoM, marking the first monthly decline since the pandemic began in 2020, further explaining why the US Fed opted to hold rates steady this week. Annual PCE inflation slowed to 3.7% from May's three-year high of 4.1%.
Fundamentals: Supply side, the proportion of liquid aluminum in China continued to rise. Inventory side, China's aluminum social inventory destocked by 53,000 mt from last Thursday to 953,000 mt, and by 26,000 mt from this Monday. At July month-end, destocking accelerated again and the inventory fell below the 1 million mt mark, providing solid support for aluminum prices. On the export front, the SHFE/LME price ratio continued to recover this week. As of July 30, the ratio had rebounded to 7.4, up 13.8% from its earlier low of 6.5, while import losses narrowed to around 3,300 yuan/mt, a reduction of over 45% from the previous maximum loss of 7,604 yuan/mt. The operating rate of leading downstream processing enterprises in China's aluminum industry recorded 60.2% this week, down 0.9 percentage points MoM. As the off-season effect deepened and rising aluminum prices suppressed purchasing, various sectors generally fell under pressure. Aluminum wire and cable and secondary aluminum saw the largest declines, while primary aluminum alloy, aluminum extrusion, aluminum plate/sheet and strip, and aluminum foil also weakened in tandem.
Primary Aluminum Market: The center of SHFE aluminum 2608 contract futures was higher than the same period of the previous trading day during early trading. Rising aluminum prices noticeably dampened market purchasing sentiment. During the day, some suppliers quoted on par with the SHFE aluminum 2608 contract, and market price acceptance remained weak. Mainstream transaction prices were mainly between a discount of 10 yuan/mt and parity against the SHFE aluminum August contract. Today's shipment sentiment index in east China was 3.13, down 0.03 MoM; the purchasing sentiment index was 2.90, down 0.10 MoM. Aluminum futures rose again, keeping trading sentiment in the central China market sluggish. Suppliers tended to sell large volumes at higher prices, resulting in ample spot circulation. However, downstream processing enterprises showed low purchase willingness, with only a few traders purchasing and stockpiling at low discounts. Ultimately, the actual transaction price range in the central China market was around a discount of 120-160 yuan/mt against the SHFE aluminum August contract. Today's shipment sentiment index in central China was 3.18, up 0.06 MoM; the purchasing sentiment index was 2.80, down 0.02 MoM.
Aluminum Scrap: Today, SMM A00 spot aluminum closed at 23,630 yuan/mt, up 230 yuan/mt from the previous trading day, with aluminum scrap market prices generally following the increase by 100-200 yuan/mt across regions. Regarding price differences, as of July 30, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was approximately 2,070 yuan/mt, while the price difference between A00 aluminum and shredded aluminum tense scrap was about 860 yuan/mt. Amid the consumption off-season, aluminum scrap suppliers' willingness to sell at low prices was generally low, keeping overall aluminum scrap prices firm. On the demand side, with the arrival of the high-temperature holiday period, the operating rate of downstream cast aluminum alloy enterprises declined, and orders shrank; operating rates at secondary aluminum plate/sheet and strip enterprises were moderate, but overall raw material demand support had clearly weakened compared with Q2. In the short term, the tight supply of compliant, invoiced cargoes persists, and suppliers' reluctance to sell at low prices provides bottom support for prices. On the import side, the lagged effects of the UAE export ban and the EU's tariff policy increase will gradually become apparent in the coming months, with port arrivals, June-August, staying low. On the demand side, the sluggish downstream orders trend is unlikely to change in the short term, and scrap utilization enterprises will most likely continue their strategy of purchasing as needed and maintaining low inventories, making it difficult for the purchasing atmosphere to see significant improvement.
Secondary Aluminum Alloy: Spot side: Today, ADC12 market quotes showed a general upward trend, with most enterprises raising by 100 yuan/mt. Driving factors side, influenced by the continuous rise in primary aluminum prices and futures, cost support further strengthened, and enterprises generally followed the uptrend. However, demand side, with the arrival of the high-temperature holiday, downstream enterprises' operating rates dropped, orders at secondary aluminum plants shrank, shipment pace slowed, and actual transactions were subdued. Short-term market is expected to maintain a tug-of-war pattern between cost support and demand constraints, and future price trends will still need to closely track aluminum price fluctuations and changes in downstream procurement demand.
Comprehensive Outlook: Recently, macro front improved, expectations for US Fed interest rate hikes continued to ease marginal constraints on non-ferrous sector, domestically the proportion of liquid aluminum kept rising, and the Middle East geopolitical risk premium continued to overlay with domestic aluminum ingot destocking, jointly underpinning aluminum price performance. Short-term market confidence significantly strengthened. However, overseas aluminum long-term capacity is being continuously put into production, traditional end-use demand in China is weak, and repeated expectations for US Fed interest rate hikes and uncertainties in Middle East geopolitical situation are disturbing, putting some pressure on upside room for aluminum prices. Short-term aluminum prices maintained a consolidation pattern on a strong note.
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