Will China Aluminum Inventory Decline Be Sustainable? SMM Reports

In H1 2026, SHFE aluminum prices exhibited a "high-then-low" pattern. In Q1, macro front, expectations for US Fed interest rate cuts intertwined with Middle East geopolitical conflicts, driving aluminum prices to surge to record highs; entering Q2, with the confirmation of the US strong-dollar policy stance, marginal easing of supply disruptions in the Middle East, and China's downstream consumption entering the off-season, the SHFE aluminum price center shifted lower continuously. Looking ahead to H2, macro front, the strong US dollar and liquidity concerns outside China will continue to weigh on nonferrous metal valuations; supply side, high aluminum prices are stimulating capacity release, with China's operating capacity expected to continue to increase MoM and new capacity in the Middle East and Indonesia gradually ramping up; demand side, domestic demand recovery is at a mild pace, and orders on hand for aluminum semis exports can still provide a floor, but expectations for new orders are weakening. Overall, the SHFE aluminum price center in H2 is expected to continue to shift lower, with the full year showing a "high-then-low" pattern.