Expectations for US Fed Interest Rate Hikes, Coupled With Continued Drawdowns in China’s Social Inventory, Keep Aluminum Prices in a Short-Term Fluctuating Range [SMM Aluminum Morning Meeting Minutes]

7.3 SMM Aluminum Morning Meeting Minutes

Futures: The most-traded SHFE aluminum contract opened at 23,455 yuan/mt in the night session on July 29, with a high of 23,510 yuan/mt and a low of 23,420 yuan/mt, and closed at 23,480 yuan/mt, up 0.11% from the previous close. During this period, prices consolidated at highs and ended with a small bullish candlestick. Prices continued to hold above the MA5 (23,415.45), MA10 (23,341.50), MA20 (23,269.66), MA40 (23,257.06), and MA60 (23,347.40) moving-average system; the moving averages provided support, support at the stage low remained effective, and the price center stayed high. Trading volume shrank significantly during this period, open interest edged down, showing bears reducing positions, with a lack of incremental funds from bulls following through. From a technical perspective, on the 4-hour MACD, DIFF (67.45) was above DEA (39.33), the red histogram continued to expand, the bullish structure remained intact, and short-term consolidation at highs digested resistance around 23,535. LME aluminum opened at $3,150.0/mt on July 29, with a high of $3,187.5/mt and a low of $3,143.0/mt, and closed at $3,176.5/mt, up 0.89% from the previous close. On the day, prices consolidated at lows, rebounded, and ended with a bullish candlestick; prices moved above the MA5 (3,168.56) and MA10 (3,167.64) short-term moving averages and tested upward the MA20 (3,181.40) resistance, while the MA40 and MA60 medium and long-term moving averages remained above prices, and the broader bearish structure had not yet changed. Trading volume pulled back slightly on the day, open interest ticked up slightly, showing bulls adding positions, and fund sentiment improved somewhat. From a technical perspective, on the daily MACD, DIFF (-36.03) was above DEA (-51.19), the red histogram ran steadily, the low-level repair trend continued, and the height of the short-term rebound was capped by the medium and long-term moving averages, leaving limited upside room.

Macro front: The US Fed announced on Wednesday that it would keep interest rates unchanged at 3.50%-3.75%, marking the fifth consecutive meeting with no change; the vote was 9-3, with three regional Fed presidents voting in favor of a rate hike. According to CME “FedWatch”: the probability that the US Fed will keep rates unchanged through September was 36.8%, the probability of cumulative hikes of 25 bps was 63.2%, and the probability of cumulative hikes of 50 bps was 0% (before the Fed decision: 17.8%, 60.2%, and 22%, respectively). The probability that the US Fed will keep rates unchanged through October was 26.2%, the probability of cumulative hikes of 25 bps was 55.6%, the probability of cumulative hikes of 50 bps was 18.2%, and the probability of cumulative hikes of 75 bps was 0% (before the Fed decision: 11.9%, 46.1%, 34.7%, and 7.3%, respectively).

Fundamentals: The Ministry of Ecology and Environment, together with the National Development and Reform Commission (NDRC) and 18 other departments, jointly released the “National 15th Five-Year Plan for Addressing Climate Change.”According to the Plan, by 2030, carbon dioxide emissions per unit of GDP are expected to fall by 17% from 2025 levels; carbon dioxide emissions per unit of product in the national carbon emissions trading market’s covered sectors are expected to decline by around 3% from 2025; a national voluntary greenhouse gas emissions reduction trading market featuring integrity and transparency, unified methodologies, broad participation, and alignment with international standards will be established; the product carbon footprint management system will be basically completed; monitoring and control of non-CO2 greenhouse gases will be strengthened; a 30 million mt CO2e emissions reduction capacity will be formed; the climate change adaptation work system will be further improved; the development of a climate-resilient society will achieve phased progress; and awareness and capabilities in addressing climate change will continue to strengthen. Inventory side, as of this Thursday, aluminum ingot inventory in China’s major consumption hubs stood at 953,000 mt, down 26,000 mt from this Monday and down 53,000 mt from last Thursday.

Primary aluminum market: In early trading, the center of SHFE aluminum 2608 contract trading was higher than the same period of the previous trading day. Affected by weak end-use demand, overall market purchases today were still mainly driven by rigid demand stockpiling. Driven by the rise in aluminum prices, some traders became more active in sell, but purchase willingness remained limited. Mainstream transaction prices were mainly at parity to a premium of 10 yuan/mt against the SHFE aluminum 08 contract. Today, the east China market’s shipment sentiment index was 3.16, up 0.08 MoM; the purchase sentiment index was 3, unchanged MoM. Repeated flare-ups in the US-Iran conflict disrupted the night session, pushing SHFE aluminum prices higher. Today, traders and downstream processing enterprises in the central China market mostly stayed on the sidelines, with low purchase willingness, and transactions were sluggish. Some large suppliers held prices firm and held back from selling, while smaller players showed no clear willingness to hold prices firm, resulting in pronounced divergence between quoted and transacted prices. Ultimately, the actual transaction price range in central China hovered at a discount of 100-140 yuan/mt against the SHFE aluminum 08 contract, with a continued weakening trend. Today, the central China market’s shipment sentiment index was 3.12, up 0.01 MoM; the purchase sentiment index was 2.82, down 0.04 MoM.

Aluminum scrap: Today, SMM A00 spot aluminum prices closed at 23,400 yuan/mt, up 200 yuan/mt from the previous trading day, and aluminum scrap prices across regions generally followed, rising by 100-200 yuan/mt. In terms of the price difference between A00 aluminum and aluminum scrap, as of July 29, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,030 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 710 yuan/mt, continuing to hover at an extremely low historical level. Imports side, according to customs data, China’s aluminum scrap imports in June 2026 totaled about 132,800 mt, marking a third consecutive monthly decline from 152,000 mt in May. From the cumulative data for 2026, total aluminum scrap imports from January to June were about 981,800 mt. Recently, import orders into Guangdong from Southeast Asia increased somewhat. Although the import window improved versus earlier, most new deals were concentrated in low-priced resources, and overall spot market activity remained limited. Affected by the UAE’s aluminum scrap export ban and the EU’s tariff hike policy, the tightening effect on high-quality imported aluminum scrap supply is expected to become more evident in the future. The aluminum scrap market was expected to continue a move-sideways pattern this week, characterized by demand suppression and cost support. Against the backdrop of the deepening off-season, downstream end-use orders were unlikely to see any substantive improvement. Scrap utilization enterprises continued purchasing as needed, and the procurement sentiment was unlikely to improve significantly. The mainstream trading range for shredded aluminum tense scrap (priced based on aluminum content) was expected to hover between 19,800-20,500 yuan/mt. At present, the price difference between A00 aluminum and aluminum scrap has narrowed to a historical low, significantly weakening aluminum scrap’s economic advantage over primary aluminum. If primary aluminum prices continue to decline, the replacement effect of primary aluminum on aluminum scrap is expected to accelerate. Close attention should be paid to the crowding-out effect of aluminum price movements on aluminum scrap demand.

Secondary aluminum alloy:Spot market: Today, overall ADC12 market quotations were raised by 100 yuan/mt. Driven by the simultaneous rise in aluminum prices and futures, procurement costs for aluminum scrap increased further. The cost side provided strong support for ADC12 prices, and most enterprises chose to raise quotations accordingly to pass through cost pressure. However, market feedback indicated that downstream demand remained in the off-season, and some enterprises adopted a wait-and-see stance toward actual transactions after the price adjustment. Overall, the current increase in ADC12 prices was mainly cost-driven, while the demand side still provided insufficient support for a sustained rise in prices. In the short term, the market was expected to maintain an operating pattern where cost support and demand constraints coexist. Subsequent price trends still need to be monitored, including aluminum price fluctuations and downstream order follow-through.

Overall outlook:The continued accumulation of Middle East geopolitical risk premium, together with continued destocking of aluminum ingot in China, jointly provided support for aluminum prices; however, the continued rollout of aluminum capacity outside China in the longer term and weak traditional end-use demand in China, coupled with repeated expectations for US Fed interest rate hikes outside China and disruptions from uncertainty in the Middle East geopolitical situation, meant that upside room for aluminum prices faced clear pressure, and aluminum prices were likely to maintain a consolidation pattern in the short term.

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