CPI Met Expectations, Easing Macro Concerns; Continued Destocking Provides Price Support [SMM Aluminum Morning Meeting Minutes]

8.13 SMM Aluminum Morning Meeting Minutes

Futures: SHFE aluminum closed at 24,195 yuan/mt, down 0.62%. The price fell below the MA5 (24,187) but remained above the MA10 (23,961), MA30 (23,435), and MA60 (23,708). Short-term moving-average support faced a test, but the medium-term bullish structure remained intact. MACD: DIF=224.4 and DEA=128.3, maintaining a golden cross, but the histogram narrowed to 192.2 (224.33 the previous day), indicating slightly weaker bullish momentum. Trading volume continued to shrink to 48,900 lots, with strong wait-and-see sentiment at high levels. The suggested core trading range for SHFE aluminum was 23,800-24,500. LME aluminum closed at $3,312/mt, down slightly by 0.05%. The price fell below the MA5 (3,318.6) but remained above the MA10 (3,274.55), MA30 (3,198.73), and MA60 (about 3,326). Short-term moving-average support faced a test, while the medium-term bullish structure remained intact. The MACD histogram narrowed to 41.42 (53.97 the previous day), indicating slightly weaker bullish momentum. The suggested core trading range for LME aluminum was 3,280-3,340.

Macro front: The latest US inflation data were released. Data published by the US Department of Labor showed that in July, the unadjusted CPI YoY growth rate slowed to 3.4%, and the core CPI YoY growth rate slowed to 2.5%. Seasonally adjusted CPI rose 0.1% MoM, and core CPI rose 0.2% MoM, both in line with market expectations. After the data release, traders’ expectations for US Fed interest rate hikes in September were basically stable.

Fundamentals: Supply side, China’s weekly aluminum production was basically stable this week, and the proportion of liquid aluminum rose 0.19 percentage points MoM. Outside China, with new projects ramping up production and resumption projects continuing to advance, aluminum supply is expected to keep increasing. However, in the short term, the global destocking trend for aluminum ingot remained unchanged. Demand side, downstream processing enterprises were in the traditional consumption off-season, with overall operating rates under pressure; aluminum billet processing fees pulled back, and substitution demand for aluminum ingot weakened. Inventory side, China’s aluminum social inventory continued the destocking trend this week. As of this Thursday, China’s aluminum ingot social inventory fell by 19,000 mt from this Monday to 898,000 mt, and by 35,000 mt WoW from last Thursday. In the short term, aluminum ingot inventory is expected to continue destocking. In terms of overseas supply, UAE EGA’s semiannual results report disclosed the resumption progress at the AlTaweelah aluminum plant, which was shut after an attack on March 28. Of the plant’s 1,262 pots, 18% had been restarted. Production is expected to recover to pre-incident levels in Q1 2027. Output at the alumina refinery fell significantly YoY in H1 2026, and capacity recovered to 50% of pre-incident levels in early July.

Primary aluminum market: In early trading, the SHFE aluminum 2608 contract continued to trade at elevated levels. Warehouse withdrawals in Wuxi were relatively high, while inbound deliveries were temporarily relatively low due to weather issues, and inter-trader transactions were relatively active. Today, spot premiums for SHFE aluminum were mainly transacted with a center between 8-10 yuan/mt and 08+10 yuan/mt. Today, the east China market’s willingness-to-sell sentiment index was 3.17, up 0.02 MoM; the buying sentiment index was 3.26, up 0.06 MoM. Aluminum futures prices rose for several consecutive days, while buying sentiment in the central China market remained sluggish. Constrained by insufficient off-season orders and relatively high in-factory inventory, coupled with elevated aluminum prices, downstream processing enterprises kept buying sentiment at low levels, with a trend of further weakening. As aluminum prices rose and premiums softened somewhat, suppliers’ willingness to sell recovered slightly. Ultimately, the actual transaction price range in the central China market hovered at a discount of 100-140 yuan/mt against the SHFE aluminum 08 contract. Today, the central China market’s willingness-to-sell sentiment index was 3.09, up 0.03 MoM; the buying sentiment index was 2.93, down 0.01 MoM. Today, futures extended a sharp rally, and spot cargo in south China faced multiple pressures. The reality of high absolute prices combined with high premiums drove holders to rush to sell for cash, with a brief price collapse in shipments, and the downward adjustment in discounts was hard to curb. Meanwhile, demand-side absorption had clearly deteriorated: downstream players only maintained the most basic passive just-in-time procurement, and traders also entered only slowly to push for lower prices and buy on dips. In addition, a localized bearish sentiment emerged, further amplifying the imbalance on both the supply and demand sides. Mainstream quotations were at a discount of -30 to -10 yuan/mt. Deep-discount cargoes were abundant in circulation, with even extremely low-priced selling not uncommon, and the market gradually showed signs of “prices but no market.” Spot transaction prices were concentrated at a premium of 100-140 yuan/mt against the SHFE aluminum 2608 contract.
Secondary Aluminum Raw Materials: SMM A00 spot aluminum closed at 24,370 yuan/mt today, surging 270 yuan/mt from the previous trading day. China’s aluminum scrap market rose across the board, with prices for aluminum tense scrap generally up 100 yuan/mt, while bare bright aluminum wire, aluminum extrusion scrap free of paint, and other categories rose 200-300 yuan/mt. Regarding the price difference between A00 aluminum and aluminum scrap, as of August 12, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,360 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap in Foshan was about 1,260 yuan/mt. As primary aluminum prices continued to climb, aluminum scrap lacked momentum to follow, and the price difference between A00 aluminum and aluminum scrap widened again. Marginal weakening in secondary aluminum alloy and its downstream demand, together with elevated inventories of wrought aluminum alloy scrap raw materials such as doors and windows in Henan and other regions, hindered the price transmission mechanism for aluminum scrap, leaving it clearly short of momentum to follow the rise. Affected by the traditional consumption off-season, the operating rate of downstream cast aluminum alloy enterprises continued to decline, order sizes shrank, and the aluminum scrap market lacked substantial support. Looking ahead, the supply-demand mismatch is expected to be difficult to reverse in the short term. Scrap utilization enterprises are likely to maintain a strategy of purchasing as needed and operating with low inventories, and it will be hard for market trading activity to see any substantive improvement. Shredded aluminum tense scrap priced based on aluminum content is expected to be dragged this week by a stalemate in raw material prices and weak downstream demand, leaving the overall market under pressure, with the mainstream range expected to hover between 20,200 and 20,800 yuan/mt.

Secondary Aluminum Alloy: Spot market: ADC12 market quotes held up well overall today, and the SMM average price was raised by 100 yuan/mt. Primary aluminum and aluminum scrap prices continued to rise, further strengthening cost support from raw materials and boosting the market’s willingness to follow the rise, with relatively solid support at lower price levels. However, end-users remain in the high-temperature off-season, with average order and consumption performance. Downstream buyers mainly made just-in-time procurement, spot transaction improvements were limited, and demand continued to weigh on price increases to some extent. In the short term, if futures and aluminum scrap prices remain strong, ADC12 may still have room to follow further, but weak demand will cap spot gains. Overall, prices are expected to continue moving sideways within a narrow range, with cost support and demand constraints coexisting.

Overall outlook: Macro front: US July CPI and core CPI YoY growth rates slowed to 3.4% and 2.5%, respectively, both in line with market expectations. Mild easing in inflation alleviated market concerns about further aggressive rate hikes by the US Fed. Momentum for a short-term spike in US Treasury yields weakened, and macro liquidity pressure eased somewhat, providing staged support for aluminum prices. The fundamental gap persisted, aluminum ingot inventory continued to draw down, and on the outside China supply side, UAE’s EGA disclosed progress on production resumptions at its AlTaweelah aluminum plant. Currently, 18% of the plant’s 1,262 pots have restarted, with the resumption pace faster than the market’s previous expectations. The previously traded tight-supply premium faces pressure to give back gains. In the short term, aluminum prices are expected to consolidate on a strong note, but upside room will be somewhat capped by expectations of production resumptions.

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