8.21 SMM Aluminum Morning Meeting Minutes
Futures: The most-traded SHFE aluminum contract opened at 23,500 yuan/mt in the night session on August 20, hit a high of 23,615 yuan/mt and a low of 23,465 yuan/mt, and closed at 23,520 yuan/mt, down 0.32% from the previous settlement. Dragged by the LME's breakdown, futures weakened again, trading below all moving averages. Trading volume shrank in the session, with open interest pulling back slightly, mainly driven by bulls reducing positions. Technically, the 4-hour MACD continued its bearish crossover, with green bars staying high, releasing bearish momentum.
LME aluminum opened at $3,234.5/mt on August 20, hit a high of $3,234.5/mt and a low of $3,177.5/mt, and closed at $3,185.5/mt, down 1.62% from the previous settlement. The previous day's recovery failed to sustain, and the futures again moved unilaterally downward, breaking below all short-term moving averages. Open interest increased that day, with bears adding positions significantly, and bearish funds regained control. Technically, the daily MACD confirmed a bearish crossover, with green bars appearing, releasing bearish momentum.
Macro front: According to the CME "FedWatch": The probability of the US Fed keeping rates unchanged by September is 63.8%, and the probability of a cumulative 25-bp rate hike is 36.2%. The probability of the Fed keeping rates unchanged by October is 51.8%, the probability of a cumulative 25-bp rate hike is 41.4%, and the probability of a cumulative 50-bp rate hike is 6.8%. Fed's Daly said the rise in long-term yields is a global issue, weakening its indicative role for Fed policy signals, and believes there is no risk to the Fed's credibility. Short-term yields show the market understands the Fed's reaction mechanism, and the Fed's policy is in good shape, with no evidence seen to need an early rate hike. He expects the inflation shock to gradually fade, so he is "very supportive" of the Fed's decision to keep rates unchanged in July.
Fundamentals: Supply side, China's primary aluminum weekly production stayed stable this week, with the proportion of liquid aluminum pulling back slightly by 0.02 percentage points. Outside China, daily average production is expected to continue recovering, driven by new capacity and production resumptions. Demand side, the traditional consumption off-season is near its end, but the expected pre-season stockpiling has not materialized, and operating rates at downstream processing segments are generally under pressure. Affected by US tariffs on silicon-based products, the market reported that orders at some PV extrusion enterprises have shown signs of recovery, but the overall operating rates of PV extrusion have not improved significantly. Inventory side, the destocking trend of aluminum ingot social inventory continued.
Primary aluminum market:
Today, the SHFE aluminum futures trend was similar to the same period yesterday. Wuxi saw destocking today, consumer sentiment improved notably from yesterday, and spot discounts narrowed. Transactions today were around a spot discount of 20 yuan/mt to 0 yuan/mt against the SHFE aluminum September contract. Today, the shipment sentiment index in east China was 3.2, down 0.01 MoM; the purchase sentiment index was 3.16, up 0.04 MoM. The aluminum futures adjusted slightly today, and trading sentiment in the central China market remained sluggish. Futures prices stabilized and stopped falling sharply, but downstream processing enterprises remained wait-and-see on purchases, with only some top-tier players maintaining small restocking. Suppliers showed a clear willingness to hold prices firm, so market quotations did not trend downward strongly. Eventually, the actual transaction price range in central China was around a spot discount of 70-90 yuan/mt against the SHFE aluminum September contract. Today, the shipment sentiment index in central China was 3.1, down 0.01 MoM; the purchase sentiment index was 2.9, unchanged MoM. The futures continued to fall today, while south China spot market stabilized with an improving trend. The cumulative decline in absolute prices has been considerable, clearly breaking below the monthly moving average. Coupled with stable destocking and a notable single-day drop, these two positives made suppliers generally more reluctant to sell, and price adjustments and concessions almost disappeared. Mainstream quotations were at a premium of 0~+10 yuan/mt, with the center steadily rising, and supply tightened notably. Demand side, downstream buyers kept increasing restocking at low prices, solidifying the demand bottom support. Spot supply was already limited, and traders who tried to push for lower prices found it difficult to find low-priced sources, eventually having to actively accept non-premium sources, and even small premiums were taken. The supply-demand pattern tightened, and overall transactions were good. Spot transaction prices were concentrated at a premium of 75-115 yuan/mt against the SHFE aluminum 2609 contract.
Secondary Aluminum Raw Materials: Today, SMM A00 spot aluminum prices closed at 23,670 yuan/mt, down 230 yuan/mt MoM from the previous trading day. China's aluminum scrap market prices generally followed the decline, with some regions that held a wait-and-see stance yesterday catching up with the drop today. Against the backdrop of sustained high primary aluminum prices, the fluctuation range of aluminum scrap has been relatively limited, and the price transmission mechanism has been hindered. However, with the recent pullback in primary aluminum, the price resilience of aluminum scrap provides an opportunity for narrowing the price difference between A00 aluminum and aluminum scrap. On August 20, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 2,360 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 1,150 yuan/mt. On the import and export front, according to SMM customs data, China's aluminum scrap imports in July 2026 totaled approximately 119,600 mt, down MoM from 133,000 mt in June, mainly due to the inverted price spread between Chinese and overseas markets in the earlier period and shipment delays, with overseas high-quality scrap replenishment remaining low. Affected by the UAE's ban on aluminum scrap exports and the EU's tariff hike policies, the contraction effect of supply from Europe and the Middle East continues to manifest, further solidifying Southeast Asia's position as a major supplementary source. It is expected that next week, the aluminum scrap market will continue the pattern of demand suppression and cost support, moving sideways in a narrow range. Currently, we are at the tail end of the traditional off-season, and it is difficult for downstream terminal orders to see substantial growth. Scrap utilization enterprises continue their strategy of purchasing as needed, with a cautious procurement atmosphere, and the pre-season effect is not yet significant. Enterprises still need to wait for further observation on the intake of subsequent orders. The mainstream operating range for shredded aluminum tense scrap (priced based on aluminum content) is expected to be around 19,900-20,700 yuan/mt.
Secondary Aluminum Alloy: Spot market: Today, the ADC12 market quotes remained generally stable, with SMM ADC12 prices holding steady at 23,900 yuan/mt from the previous day. Futures and the cost side of aluminum scrap saw limited fluctuations, while aluminum prices saw a narrower decline. The cost side still provide support to spot prices, and the momentum for further downward adjustments was insufficient. However, current end-use demand remains weak, and downstream purchasing is mainly based on rigid needs, with overall market transactions lacking significant improvement. Therefore, enterprises generally adopt a wait-and-see stance with stable prices. In the short term, ADC12 prices are expected to continue consolidating, and attention should be paid to aluminum price trends and changes on the demand side.
Comprehensive Outlook: Macro sentiment repeats itself, frequently disturbing aluminum prices in China and overseas. On the fundamentals side, aluminum ingot inventory continues to see a destocking trend, providing bottom support for aluminum prices. However, the SHFE/LME price ratio is to be repaired, and with the digestion of orders on hand, export demand is expected to gradually weaken. Domestic terminal end-use demand remains ordinary, and the market holdl some concerns over peak-season demand. In the short term, aluminum prices are expected to consolidate on a subdued note.
[The information provided is is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make cautious decisions and not replace their independent judgment with this. Any decisions made by clients are unrelated to SMM.]
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