SHFE aluminum edges higher in consolidative recovery; alumina weakens on inventory buildup, prompting position reductions and exits [SMM Aluminum Briefing]

SMM July 28:

The most-traded SHFE aluminum 2609 contract closed at 23,220 yuan/mt today, up 45 yuan or 0.19% intraday. Trading volume was 194,176 lots, open interest was 251,435 lots, up 268 lots on the day, indicating some new positions were added. There were signs of mild long-short battle in position opening. Prices were below the 5-day MA, but held above the 10-day and 30-day MAs, and below the 60-day MA. Near-term MAs still formed a bearish arrangement. After a sharp decline earlier, prices consolidated at lows and repaired; during the day, they bottomed out and rebounded, closing slightly higher, with buying support from bulls at lows improving somewhat. The 5-day and 10-day MAs turned downward, while the 30-day and 60-day MAs also declined. The medium-term downtrend remained unchanged. The 5-day MA above served as strong near-term resistance, and rebound room continued to be constrained, but there was some near-term support at lows below. Both DIF and DEA lines were below the zero axis, and bearish momentum had not yet fully faded, so overall downward pressure persisted.

SMM Commentary: Macro sentiment improved slightly recently. Ongoing geopolitical risk premium in the Middle East coupled with continued destocking of domestic aluminum ingots jointly underpinned aluminum prices. However, the continued rollout of overseas aluminum capacity in the medium-to-long term, weak traditional end-use demand in China, along with recurring macro uncertainties, exerted notable pressure on the upside room of aluminum prices. In the short term, aluminum prices maintained a consolidation pattern.

The most-traded alumina 2609 contract closed at 2,683 yuan/mt today, down 22 yuan or 0.81% intraday. Trading volume was 208,664 lots, open interest was 289,929 lots, down 6,655 lots from the prior day, with significant outflows as positions were reduced. Prices were below the 5-day, 10-day, 30-day, and 60-day MAs. Moving averages across all timeframes formed a bearish alignment from top to bottom. Near-term bears continued to exert pressure, and prices drifted lower amid consolidation. Near-term bullish buying support at lows was weak. Medium and long-term MAs all turned from support into resistance levels. The medium-term drifting lower consolidation pattern remained unchanged. During any rebound repair phase, prices will continue to face layers of resistance from MAs across all timeframes.

SMM Commentary: On the supply side, production during the week was basically flat compared to the previous week, and operations were steady, but the ample supply situation remained unchanged, continuing to cap prices. In terms of inventory, total alumina inventory nationwide increased by 24,000 mt WoW to 7.028 million mt, extending the inventory buildup trend. In overseas markets, due to geopolitical conflicts, low-priced cargoes had previously flowed heavily into China, depleting circulating inventory outside China. Recently, stockpiling demand for new capacity in Indonesia and restocking needs from production resumptions in the Middle East were released in a concentrated manner, tightening overseas spot supply and driving a notable increase in alumina prices outside China. Looking ahead, China lacks positive macro catalysts, and the oversupply situation continues to weigh. Short-term prices are expected to remain in the doldrums. Adding to this, Guangxi is expected to ramp up production, and inventory will likely continue to build next week.

[The information provided is for reference only. It does not constitute direct investment research advice. Clients should make prudent decisions and not rely on this as a substitute for independent judgment. Any decisions made by clients have no relation to Shanghai Metals Market (SMM).]