Central Bank Releases Easing Signals; Aluminum Price Upside Room Limited Amid Supply-Demand and Geopolitical Dynamics [SMM Aluminum Morning Meeting Minutes]

8.3 SMM Aluminum Morning Meeting Minutes

Futures: The most-traded SHFE aluminum 2609 contract closed at 23,665 yuan/mt, unchanged from yesterday’s settlement price, with a gain of 0.00%. It opened intraday at 23,600 yuan/mt, fluctuating within the range of 23,550-23,695 yuan/mt. Prices traded above MA5 (23,519.00), MA10 (23,371.00), and MA30 (23,142.83), but below MA60 (23,787.83). Medium and long-term moving averages remained in a bearish alignment and continued to press lower. A low-level consolidation repair structure has emerged, with the 60-day moving average above forming key resistance. For the MACD indicator, DIF (19.3006) was above DEA (-78.0446), and the MACD red histogram stood at 194.6903. Bearish momentum continued to weaken, while bullish repair momentum persisted. The suggested core trading range for SHFE aluminum is 23,400-24,000 yuan/mt. The LME aluminum 3M contract closed at $3,189.00/mt, down 0.19%. Prices traded above MA5 (3,180.40), MA10 (3,178.40), and MA30 (3,157.92), but below MA60 (3,366.95). Medium and long-term moving averages were in a bearish alignment and gradually pressed lower. Overall, a low-level consolidation repair structure has emerged, with the 60-day moving average above forming clear resistance. For the MACD indicator, DIF (-24.4334) was above DEA (-39.6437), and the MACD red histogram was 30.4207. Bearish momentum continued to weaken, and the downward momentum continued to slow down. The suggested core trading range for LME aluminum is $3,100-3,250/mt.

Macro front: After sharply escalating, US-Iran tensions saw a dramatic reversal. US President Trump said that Iran and other Middle Eastern countries had requested the US to postpone launching an attack; based on this request, he agreed to cancel the military strike. Trump said there is already an agreement on the Strait of Hormuz, and an agreement on denuclearization will also be reached. He said talks with Iran are being conducted in the form of negotiations, starting Monday afternoon (Tuesday morning Beijing time). An Iranian military official said Trump’s claim that Iran requested a halt to attacks is “a new lie.” An Iranian source said the plan to reopen the Strait of Hormuz is purely a rumor. Iranian Foreign Minister Araghchi said Iran and Oman discussed common principles and operational mechanisms for managing safe navigation in the Strait of Hormuz; the talks were productive and made some progress. The negotiations between the two sides have now entered the final stage and are close to completion. Iranian Foreign Ministry spokesperson Baghaei said the Strait of Hormuz will never return to its pre-war state. The current negotiations between Iran and Oman around the waterway are unrelated to whether the Strait of Hormuz is opened or closed. The People’s Bank of China convened a work conference for H2 2026. The meeting emphasized the need to implement an appropriately accommodative monetary policy, fully leverage the effectiveness of existing policies, promptly plan and introduce pragmatic and effective incremental policy, step up counter-cyclical adjustments, intensify efforts to expand domestic demand and optimize supply, solidly carry out key tasks in H2, and promote sustained economic development toward new, better, and more positive momentum.

Fundamentals:Markets outside China, overseas aluminum production resumptions and new capacity continued to ramp up as planned. Expectations persisted that the global aluminum market would shift from tightness to looseness in the longer term, continuously limiting upside room for aluminum prices. However, the US-Iran conflict continued to escalate, and shipping disruptions in the Strait of Hormuz persisted. The market worried that regional aluminum raw material inflows and outbound shipments of finished aluminum could be impeded. Coupled with rising crude oil prices pushing up overseas smelting energy costs, the regional geopolitical risk premium remained elevated. Supply uncertainty persisted, providing some downside support for aluminum prices in the short term. In the Chinese market, supply side, the proportion of liquid aluminum continued to rise; inventory side, China’s aluminum social inventory increased by 5,000 mt WoW (vs last Thursday) to 958,000 mt, while it destocked by 21,000 mt WoW (vs last Monday), and the destocking speed of aluminum ingot in China slowed down. On exports, the SHFE/LME price ratio continued to recover last week. As of July 30, the SHFE/LME price ratio had rebounded to 7.4, up 13.8% from the previous low of 6.5. Import losses narrowed to around 3,300 yuan/mt, narrowing by more than 45% from the previous peak loss of 7,604 yuan/mt.

Primary Aluminum Market:In early trading, the SHFE aluminum 2608 contract traded near yesterday’s center. Downstream players showed fear of high prices, but as it was Friday, there was just-in-time procurement for stockpiling. Meanwhile, with inventories continuing to be digested, some suppliers were unwilling to sell at lower prices, but the overall transaction price center moved lower. Today, the main transaction center for spot premiums of SHFE aluminum was between 8-20 yuan/mt and 08+0 yuan/mt. Today, the east China market shipment sentiment index was 3.09, down 0.04 MoM; the purchase sentiment index was 2.84, down 0.04 MoM. SHFE aluminum futures posted three consecutive gains, and with the Friday stockpiling cycle, downstream processing enterprises in central China showed a marked decline in stockpiling willingness, still focusing on just-in-time procurement and digesting inventories, with only a few enterprises considering stockpiling. Traders mostly purchased on dips in premiums, but overall market transactions remained sluggish. Ultimately, the actual transaction price range in central China hovered at a discount of 160-180 yuan/mt against the SHFE aluminum 08 contract.. Today, the central China market shipment sentiment index was 3.2, up 0.02 MoM; the purchase sentiment index was 2.83, up 0.03 MoM. Today, futures stopped rising and edged down, and spot in south China remained weak. Absolute prices stayed high; although the spot-futures price spread was expected to weaken, it was also relatively high. With the weekend approaching and near month-end, after briefly holding prices firm, suppliers increased selling intensity on the back of monetization demand at high levels. Mainstream quotations were at a discount of -30 to -10 yuan/mt, showing varying degrees of downward adjustment, with ample discounted spot circulation. Demand side, downstream fear of high prices had not dissipated and purchasing was weak; traders pushed for lower prices and purchased only to the minimum extent, with no flexibility except for delivery. The oversupply pattern continued, and overall transactions were slightly bleak. Spot transaction prices were concentrated at a premium of 85 yuan/mt to 125 yuan/mt over the SHFE aluminum 2608 contract.

Aluminum scrap:Today, the SMM A00 spot aluminum price closed at 23,630 yuan/mt, flat from the previous trading day on a MoM basis, and aluminum scrap prices in markets across regions were largely stable. Regarding the price difference between A00 aluminum and aluminum scrap, on July 33, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,070 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 860 yuan/mt. Against the backdrop of the off-season in consumption, aluminum scrap suppliers generally showed low willingness to sell at low prices, and aluminum scrap prices overall remained firm. Demand side, as the high-temperature holiday approached, operating rates at downstream cast aluminum alloy enterprises declined and orders shrank; operating rates at secondary aluminum plate/sheet and strip enterprises were moderate, but overall raw material demand showed a marked weakening in support compared with Q2. In the short term, the tight supply of compliant, invoiced cargo on the supply side continued, and suppliers’ insufficient willingness to sell at low prices provided bottom support for prices. On the import side, the lagged effects of the UAE export ban and the EU tariff policy are expected to gradually emerge in subsequent months, and port arrivals from June to August remained at low levels. Demand side, the sluggishness in downstream orders was unlikely to change in the short term; scrap utilization enterprises were highly likely to continue purchasing as needed and maintaining low inventories, and the procurement atmosphere was unlikely to improve significantly.

Secondary aluminum alloy: Spot: Today, ADC12 market quotes were largely stable. The cost side showed no significant changes for the time being, still providing some support to prices, but demand side performance was weak; insufficient orders exerted some दब pressure on the market, and some enterprises showed a slight willingness to cut prices. Under the dual effects of cost support and weak demand, short-term upward momentum for further price increases was insufficient, and the market continued to consolidate at highs. The subsequent price direction still needs to focus on primary aluminum price trends and the recovery of downstream orders.

Overall outlook:Recently, the macro front improved somewhat, and the marginal constraints of expectations for US Fed interest rate hikes on the nonferrous sector continued to ease. In China, the proportion of liquid aluminum continued to rise, and the PBOC will implement an accommodative monetary policy, strengthen counter-cyclical adjustments, and step up efforts to expand domestic demand, promoting sustained improvement in the economy. The geopolitical risk premium in the Middle East persisted, jointly underpinning aluminum prices, and short-term market confidence strengthened significantly. However, the continued commissioning of outside China aluminum forward capacity, relatively weak traditional end-use demand in China recently, coupled with repeated swings in expectations for US Fed interest rate hikes outside China and disturbances from uncertainties in the Middle East geopolitical situation, meant that upside room for aluminum prices still faced some pressure.

[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions prudently and should not use this as a substitute for their own independent judgment. Any decisions made by clients are unrelated to SMM.]