SMM Analysis: Aluminium Prices Fell back amid Poor Fundamentals

SHANGHAI, Jul 26 (SMM) - After falling to a new low of 17,025 yuan/mt on July 14, SHE aluminium bottomed out. However, with the approach of the US Fed's meeting, the market has entered a state of caution, leaving SHFE aluminium fluctuating sideways over the past few days. As of yesterday's close, SHFE aluminium closed down 0.64% at 17,810 yuan/mt.
SMM A00 spot aluminium ingots were quoted between 17,820-17,860 yuan/mt yesterday, with the average down 150 yuan/mt from the previous trading day to 17,840 yuan/mt.
On the macro level, the Federal Reserve plans to announce the results of its July interest rate decision in the early hours of July 28, Beijing time. The market generally expects a 75 basis point interest rate hike. The aggressive interest rate hike expectations brought about by the high inflation in the US have cooled, thus the pressure on base metals has eased.  Fundamentals: The aluminium ingot social inventories across China’s eight major markets totalled 671,000 mt as of July 25, up 3,000 mt from last Thursday, but 111,000 mt lower than in the same period last year. Shanghai, Wuxi and Foshan all experienced different levels of accumulation.
Downstream demand continued to be sluggish. The average operating rate of major aluminium processing enterprises was basically flat at 66.3% last week. Orders in various aluminium processing sectors are relatively poor in the off-season. 
The output cuts in Sichuan are too small to have any substantial shock on the market supply. Aluminium ingot social inventory began to rise amid poor demand. In this context, aluminium prices will remain pressured.