SMM Aluminum Morning Briefing on July 13
Futures: The most-traded SHFE aluminum 2608 contract closed at 23,030 yuan/mt, down 65 yuan or 0.28% compared to prior settlement price, with intraday opening at 22,950 yuan/mt and fluctuating in a range of 22,910–23,090 yuan/mt. Price is above the MA10 (22,822.00) but below the MA5 (23,032.00), MA30 (23,591.00), and MA60 (24,171.33), with short- and medium-term moving averages in bearish alignment and gradually weighing, forming a clearly weak consolidative structure where all cyclical moving averages above create layered resistance. On the MACD indicator, DIF (-324.3768) stays above DEA (-378.8731) with a red bar reading of 108.9926, indicating fading bearish momentum. The recommended core trading range for SHFE aluminum is 22,400–23,400 yuan/mt. The LME aluminum 3M contract closed at $3,149/mt, up 0.16%, with price below the MA5 ($3,156.20), MA10 ($3,128.90), MA30 ($3,330.97), and MA60 ($3,459.19). Short- and medium-term moving averages are in overall bearish alignment, while longer-term averages overhead exert clear pressure. After a sharp prior drop, the market is stabilizing at low levels, with cyclical moving averages above creating layered suppression. On the MACD, DIF (-91.4127) stays above DEA (-103.6193) with a red bar of 24.4131, signaling waning bearish momentum and a slowdown in the decline. The recommended core range for LME aluminum is $3,000–$3,200/mt.
Macro front: Tensions flared abruptly in the Middle East. Iran’s Revolutionary Guard announced the closure of the Strait of Hormuz, the world’s most critical energy chokepoint, and the US military subsequently declared strikes on Iran, with Iran launching retaliatory attacks on multiple US targets across the Middle East. Statements on the strait’s navigability are conflicting. US Central Command said the Strait of Hormuz remains open to all vessels lawfully transiting this international waterway, adding that US forces are deployed and prepared to ensure continued freedom of navigation. However, Iran’s Persian Gulf Strait Authority said the Strait of Hormuz is currently impassable. US President Trump stated that as far as the US is concerned, the Strait of Hormuz remains open.
Fundamentals: Markets outside China, overseas aluminum production resumptions and new capacity releases continue, gradually materializing global supply growth. Long-term expectations of the global aluminum market shifting from tight to ample are steadily building, significantly capping upside room for spot aluminum premiums outside China and weighing on LME aluminum prices over the medium and long term. At the same time, a strong US dollar is expected to persist, further constraining aluminum’s upside. In China, on the inventory front, domestic aluminum ingot inventories continued destocking. As of this Monday, primary aluminum ingot inventory in major Chinese consumption areas stood at 1.047 million mt, destocking by 31,000 mt from last Thursday and by 51,000 mt WoW from Monday last week.
Primary Aluminum Market: In early trading, the SHFE aluminum 2606 contract moved at a center higher than the same period of the previous trading day. Driven by higher aluminum prices, willingness to sell in the market rose MoM today. Overall downstream purchasing sentiment increased MoM recently, influenced by stockpiling ahead of Friday. Market transactions occurred at parity to a premium of 20 yuan/mt against the SHFE aluminum 07 contract. In east China, the selling sentiment index was 3.04, up 0.06 MoM, and the purchasing sentiment index was 3.10, up 0.06 MoM. In central China, buying sentiment edged up slightly from the previous two days. Coinciding with the pre-weekend stockpiling cycle, downstream processing enterprises increased stockpile volumes compared to the prior two days, while strong purchasing sentiment for hedging positions among trading firms engaging in both spot and futures market drove premiums higher. However, suppliers exhibited low willingness to sell given deep discounts, leading to a rising trend in market quotes. Ultimately, actual transaction prices in central China were mainly within a discount range of 120-150 yuan/mt against the SHFE aluminum 07 contract. In central China, the selling sentiment index was 2.84, down 0.02 MoM, and the purchasing sentiment index was 2.18, up 0.02 MoM.
Secondary Aluminum Materials: Today, SMM A00 spot aluminum prices closed at 23,120 yuan/mt, up 170 yuan/mt from the previous trading day. The aluminum scrap market generally followed the uptrend, while some regional material categories remained stable. Regarding price spreads, on July 10, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 2,061 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 747 yuan/mt. These spreads stabilized slightly from the historically low levels seen last week but remained extremely low. The tighter reverse invoicing policy provides a floor, leaving the narrative of aluminum scrap being prone to rises but resistant to falls intact. Supply-side constraints continued to intensify, with the impact of the reverse invoicing policy deepening further. Shandong province saw reports of reverse invoicing being suspended from July, while production cuts and shutdowns spread among small and medium-sized scrap utilization enterprises in Anhui, Jiangxi, and Hubei. Compliant, invoiced aluminum scrap became increasingly scarce. On the import side, overseas supply tightness caused by earlier price spread inversions between Chinese and overseas markets persisted due to a 1-3 month shipping lag, keeping port arrivals low from June to August. Meanwhile, the UAE's aluminum scrap export ban and the EU's tariff hike further tightened overseas aluminum scrap supply. Next week, the aluminum scrap market is expected to continue moving sideways, constrained by suppressed demand and supported by costs. The mainstream operating range for shredded aluminum tense scrap (priced based on aluminum content) is expected to be around 19,900-20,500 yuan/mt. A pullback in spot primary aluminum prices limits the room for further significant narrowing of price spreads, making it difficult for aluminum scrap to lose its current cost advantage over primary aluminum in the short term. Demand-side support for aluminum scrap prices thus persists. Should aluminum prices continue to decline subsequently, the substitution effect of primary aluminum for aluminum scrap would accelerate significantly.
Secondary Aluminum Alloy: Spot market: Today, overall ADC12 market quotes were mainly stable. Only a few enterprises tentatively raised prices by 100 yuan/mt, primarily driven by strength in aluminum prices and futures, aiming to test the waters following cost-side increases. However, based on market feedback, most enterprises still opted to stay on the sidelines for now, widely believing that current end-use demand remained weak, with traditional off-season characteristics in July becoming more evident, downstream orders continuing to decline, and market transactions showing no significant improvement. Against the backdrop of limited demand support, although the cost side provided some floor to prices, spot upward momentum remained insufficient, and enterprises generally took a cautious approach to price adjustments. In the short term, the ADC12 spot market is expected to maintain sideways movement, with the price center unlikely to drop significantly due to cost support, but before end-use demand shows a material improvement, spot price upside room is expected to be somewhat constrained.
Comprehensive Outlook: Overall, recurring geopolitical conflicts in the Middle East pushing up risk premiums, combined with continuing destocking of China's aluminum ingot, supported SHFE aluminum to hold up well. However, the continued release of aluminum capacity outside China and the US's strong dollar policy will keep the upside room of aluminum prices under pressure, with clear resistance above prices. In China, aluminum ingot inventory continued destocking, providing support for SHFE aluminum prices. Based on a comprehensive assessment, aluminum prices will consolidate on a strong note and encounter resistance in the short term.
[The information provided is for reference only. This article does not constitute direct investment research or decision-making advice. Clients should make decisions prudently and not use this as a substitute for independent judgment. Any decisions made by clients are not related to Shanghai Metals Market.]
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