Macro Support Combined With Inventory Destocking, Aluminum Prices Drift Higher [SMM Aluminum Morning Meeting Minutes]

8.17 SMM Aluminum Morning Meeting Minutes

Futures: The most-traded SHFE aluminum contract opened at 23,960 yuan/mt in the night session on August 14, with a high of 24,000 yuan/mt and a low of 23,835 yuan/mt, and closed at 23,945 yuan/mt, up 0.25% from the previous close. Prices pulled back to MA5 (23,988.91); short-term moving averages turned downward, with MA10 and MA20 forming overhead resistance, while MA40 and MA60 provided support below. Open interest fell notably during the session, mainly driven by bears reducing positions. Technically, on the 4-hour chart, MACD DIFF crossed below DEA to form a bearish crossover, the green histogram expanded significantly, short-term bullish momentum faded rapidly, and prices entered a pullback phase. LME aluminum opened at $3,238.5/mt on August 14, with a high of $3,260.0/mt and a low of $3,221.5/mt, and closed at $3,245.0/mt, up 0.22% from the previous close. Prices consolidated at highs and ended with a small bullish candlestick; they pulled back from the prior high of $3,384.5/mt, found support after pulling back to MA20 (3,243.86), and traded below MA5 (3,268.58), while MA40 and MA60 continued to cap prices from above. Trading volume pulled back, while open interest increased, showing characteristics of bulls adding positions. Technically, on the daily chart, MACD DIFF (16.09) ran above DEA (5.41), the red histogram narrowed slightly, and bullish momentum weakened marginally.

Macro front: According to preliminary statistics from the central bank, the cumulative increase in aggregate financing to the real economy in the first seven months of 2026 totaled 22.25 trillion yuan, down 174 billion yuan from the same period last year. The US Department of Commerce announced on Friday that July retail sales fell 0.6% MoM, the largest decline in more than a year, versus market expectations of a slight increase. Core control group sales excluding autos, building materials, and gas stations fell 0.4%, the worst performance since January 2025. The preliminary reading of the University of Michigan’s August consumer sentiment index released the same day came in at just 51, far below the expected 54.5. According to CME FedWatch: the probability that the US Fed will keep rates unchanged through September is 67.5%, and the probability of a cumulative 25-bp hike is 32.5%. The probability that the US Fed will keep rates unchanged through October is 53.3%, the probability of a cumulative 25-bp hike is 39.8%, and the probability of a cumulative 50-bp hike is 6.8%.

Fundamentals: In July, the aluminum billet operating rate rose 1.1 percentage points MoM to 58.3%, up 5.2 percentage points YoY. Benefiting from the strong performance of aluminum billet processing fees in Q2, China’s aluminum billet supply side continued its inertia-driven uptrend in July, with the operating rate hitting a year-to-date high and also standing at a high level for the same period over the past three years. As the center of aluminum prices rebounded markedly from lows in July, downstream operating performance and purchase willingness were constrained, and adjustments on the aluminum billet supply side showed a clear lag; China’s aluminum billet processing fees pulled back sharply from June highs and have now fallen below the industry’s average production cost line. Against the backdrop that most enterprises increased output or operated at full capacity during the month, weaker processing fees prompted a small number of aluminum billet producers to adjust their production strategies and choose to suspend or cut production ahead of time. Looking ahead to August, SMM expected China’s aluminum billet supply side to retreat from highs, with the operating rate expected to pull back to around 56.9%. In terms of inventory, as of this Monday, aluminum ingot inventory in China’s major consumption regions stood at 886,000 mt, down 12,000 mt WoW from last Thursday and down 31,000 mt WoW from last Monday.

Primary aluminum market:In early trading, the SHFE aluminum 2608 contract continued to trade at elevated levels. Prices above 24,000 yuan/mt somewhat restrained downstream purchases, while transactions among traders were relatively active. Today, the center of transactions for SHFE aluminum spot premiums mainly ranged between 8-40 yuan/mt and 08-20 yuan/mt. Aluminum prices were cut consecutively, and with Friday coinciding with the stockpiling cycle, downstream processing enterprises’ buying sentiment in the central China market saw another slight correction from earlier. However, the overall market trading atmosphere remained sluggish; suppliers showed weak willingness to hold prices firm, and quotations continued to trend lower. Ultimately, the actual transaction price range in the central China market was around a premium of 80-110 yuan/mt against the SHFE aluminum 09 contract. Futures continued to plunge today, while South China spot adjusted in the doldrums. As prices fell and inventory returned to a destocking track, suppliers attempted to hold prices firm and sell in the morning; but as the bearish mood intensified toward the weekend and the willingness to cash out early gradually rose, most sellers made slight downward adjustments and offered concessions. Mainstream quotations were at a discount of -10 to 0 yuan/mt, with spot circulation relatively ample, though some still held to premiums and sold slowly. Demand side, downstream gradually shifted from initially expecting price declines, staying on the sidelines, and buying less to increasing replenishment on dips, though volumes were limited; in the trading segment, participants mainly pushed for lower prices to take in discounted cargoes, with only small volumes accepting higher offers to restock. Amid the tug-of-war between supply and demand, overall trading was lukewarm. Spot transaction prices were concentrated at a premium of 60-100 yuan/mt against the SHFE aluminum 2608 contract.

Aluminum scrap:Today, the SMM A00 spot aluminum price closed at 23,870 yuan/mt, continuing to fall 250 yuan/mt from the previous trading day, while China’s aluminum scrap prices generally followed with a drop of 200 yuan/mt. As for the price difference between A00 aluminum and aluminum scrap, on August 14, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,250 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 1,150 yuan/mt, widening again WoW. Against the backdrop of primary aluminum prices continuing to rise, aluminum scrap fluctuated within a relatively limited range, and the price pass-through mechanism was impeded, mainly constrained by two factors: first, marginal weakening in demand for secondary aluminum alloy downstream. With high-temperature holidays overlapping with the traditional consumption off-season, cast aluminum alloy enterprises’ operating rates continued to decline and order volumes shrank; second, wrought aluminum alloy scrap inventories for door and window applications, among others, remained high in places such as Henan, weakening the elasticity of aluminum scrap price increases. In addition, policy constraints from reverse invoicing on the supply side continued, and the scarcity of compliant aluminum scrap with invoices provided a floor support for aluminum scrap prices. Recently, the import window improved compared with earlier, and traders became more active in inquiries and purchasing. Shipments were expected to arrive successively in mid-to-late August, which was likely to improve import supply in the short term. The current high-temperature holiday had not yet ended, and downstream cast aluminum alloy enterprises kept operating rates at low levels. Order recovery still needed time. Scrap utilization enterprises were highly likely to continue the strategy of purchase as needed and low inventories, and a concentrated restocking rally still had to wait. Notably, the price difference between A00 aluminum and shredded aluminum tense scrap had widened to 1,150 yuan/mt, and the economic advantage of aluminum scrap versus primary aluminum recovered somewhat. It was expected that the aluminum scrap market would maintain a pattern of high-level sideways moves in the short term, and weak end-use demand remained the core factor weighing on prices.

Secondary aluminum alloy:Spot market: Today, overall ADC12 market quotations were lowered by 200 yuan/mt. The price cut was mainly driven by factors including the pullback in aluminum prices, aluminum scrap prices falling in tandem and pulling costs lower, and weaker cast aluminum alloy futures, with cost support weakening somewhat. Meanwhile, it was still the high-temperature off-season, and some downstream players had not fully resumed work. Orders and purchasing demand were weak, the spot market lacked sufficient support, and enterprises had limited willingness to hold prices firm. Under the combined impact of lower costs and weak demand, today’s ADC12 prices generally weakened in line with the market.

Overall outlook:On the macro front, US July inflation data pulled back as expected, and July retail data weakened sharply. Consecutively weak economic data significantly lowered market expectations for US Fed interest rate hikes in September. The probability of a September hike fell markedly, and the market began to trade expectations for the end of the hiking cycle. The US dollar index was under pressure and weakened, providing macro support for LME metals. The fundamental gap persisted, aluminum ingot inventory continued to draw down, and on the outside China supply side, UAE’s EGA disclosed the production resumption progress at the Al Taweelah aluminum plant. Currently, 18% of the plant’s 1,262 pots had restarted, and the pace of resumptions was faster than the market had previously expected. The previously traded tight-supply premium faced pressure to give back. In the short term, aluminum prices were expected to consolidate on a strong note, but upside room would be somewhat capped by expectations for production resumptions.

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