Weekly aluminum ingot destocking magnitude contracts, under the tug-of-war between longs and shorts in macro fundamentals, the aluminum price is expected to consolidate on a strong note in the short term [SMM Aluminum Weekly Review]

SMM reports on August 6:

Macro perspective:

Tensions between the US and Iran eased but major differences remain. Trump said negotiations between the two sides are underway, with the Strait of Hormuz expected to reopen on August 4; Iran and Oman reached a provisional agreement on a new shipping route, but emphasized it will not return to the pre-war state and denied a full reopening. China's central bank made clear that H2 monetary policy will be moderately loose and will step up counter-cyclical adjustments; US Fed officials offered mixed signals, with an overall hawkish bias, indicating rates could rise if inflation stalls.

Fundamental side:

Supply side, China's weekly aluminum production was basically stable this week, with the proportion of liquid aluminum up 0.19 percentage point WoW. Outside China, driven by ongoing production ramp-ups at new projects and production resumptions, aluminum supply is expected to continue rising. However, the global aluminum ingot destocking trend remains unchanged in the short term. Demand side, the downstream processing industry was in the traditional consumption off-season, with overall operating rates under pressure; aluminum billet processing fees pulled back, and replacement demand for aluminum ingot weakened. Inventory side, China's aluminum social inventory continued its destocking trend this week. As of Thursday, China's aluminum ingot social inventory fell by 20,000 mt WoW from last Thursday and by 25,000 mt from this Monday, with the destocking pace narrowing further; meanwhile, aluminum billet inventory posted a slight buildup, up 4,000 mt WoW, and aluminum ingot inventory is expected to continue destocking in the short term.

In summary, differences over the Middle East situation persist. Although the US Fed did not hike rates in July, its overall stance remained hawkish. The fundamental deficit continued, with aluminum ingot inventory destocking ongoing. Short-term aluminum prices are expected to consolidate on a strong note. Next week, the most-traded SHFE aluminum contract is expected to trade in a range of 23,200–24,200 yuan/mt; LME aluminum is expected to trade in a range of $3,100–3,250/mt. Future attention should focus on the progress of production resumptions in the Middle East and the dynamics of new project commissioning plans.

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