8.12 SMM Aluminum Morning Briefing
Futures:SHFE aluminum closed at 24,320 yuan/mt, up 0.58%, with the price well above all key moving averages (MA5=24,117, MA10=23,907.5, MA30=23,377.83, MA60=23,716.17). Moving averages were in a bullish alignment and accelerating divergence, signaling a strong mid-term uptrend. The MACD indicator’s DIF stood at 216.999 and DEA at 104.835, maintaining a golden cross above the zero line. The histogram expanded to 224.329 (from 216.589 the previous day), with bullish momentum continuing to strengthen. Trading volume slightly expanded to 57,400 lots but remained at a low level. The suggested core trading range for SHFE aluminum is 23,900-24,500. LME aluminum closed at $3,364.5/mt, edging up 0.06%, with the price well above all key moving averages (MA5=3,319.8, MA10=3,267.75, MA30=3,192.8). Moving averages were in a bullish alignment, leaving the mid-term uptrend intact. The MACD histogram expanded to 53.97 (from 50.83 the previous day), with bullish momentum continuing to strengthen. The suggested core trading range for LME aluminum is 3,350-3,420.
Macro Front:Pakistan’s Defense Minister Asif stated that the US and Iran are close to reaching “some kind of arrangement,” and the situation is again developing in a direction conducive to peace arrangements or agreements. Iran’s Supreme Leader advisor Mokhber stated that the Strait of Hormuz would not reopen until Iran’s conditions are met. Qatar’s Foreign Ministry spokesperson stated that negotiations between Oman and Iran have now entered an “advanced stage,” with positive feedback received from both countries and the talks at a critical juncture.
Fundamentals:Supply side, China’s weekly aluminum production remained basically stable this week, with the proportion of liquid aluminum rising 0.19 percentage points WoW. Outside China, with ongoing production ramp-ups of new projects and production resumptions, aluminum supply is expected to continue climbing. However, the global aluminum ingot destocking trend remained unchanged in the short term. Demand side, the downstream processing industry was in its traditional consumption off-season, with overall operating rates under pressure. Aluminum billet processing fees pulled back, weakening substitution demand for aluminum ingot. Inventory side, China’s aluminum social inventory extended its destocking trend this week. As of Monday this week, China’s aluminum ingot social inventory destocked by 16,000 mt from last Thursday to 917,000 mt, and by 41,000 mt from last Monday, with the destocking pace narrowing further. Meanwhile, aluminum billet inventory accumulated slightly, with a WoW inventory buildup of 4,000 mt. Aluminum ingot inventory is expected to continue its destocking trend in the short term.
Primary Aluminum Market:In early trading, the SHFE aluminum 2608 contract continued to run at high levels. Prices above 24,000 yuan/mt exerted some restraint on downstream procurement, while trading among traders was relatively active. Today, spot premiums for SHFE aluminum mainly transacted at -8 to 40 yuan/mt against the 08-20 contract. In east China, the selling sentiment index closed at 3.16, up 0.01 WoW, while the purchasing sentiment index was 3.2, up 0.04 WoW. As aluminum futures continued to rise, trading in the central China market remained sluggish. Buying sentiment among downstream processing enterprises was subdued, and overall trading volume was thin. Small-scale traders tended to offload aggressively at high aluminum prices, while large suppliers still held prices firm. Ultimately, actual transaction prices in the central China market hovered around discounts of 120-140 yuan/mt against the SHFE aluminum 08 contract. In central China, the selling sentiment index was 3.06, up 0.02 WoW, and the purchasing sentiment index was 2.95, down 0.01 WoW. Today, aluminum prices continued to climb, putting the spot market under growing pressure. The reality of tight arrivals supported suppliers’ early attempts to hold prices firm and sell slowly without urgency; at this point, some buyers, betting on further price gains, made just-in-time procurement, and trading activity was still somewhat matched. However, once the dual highs of absolute prices and spot-futures price spreads were established, suppliers’ willingness to cash out steadily strengthened, leading to an unstoppable wave of price cuts and increased selling. Quotes circulated from -20 to 0 with spot discounts gradually widening, and aside from limited discount replenishment by traders, other demand barely followed, causing transaction momentum to weaken.
Aluminum Scrap: Today, SMM A00 spot aluminum prices closed at 24,100 yuan/mt, up 110 yuan/mt WoW. In China's aluminum scrap market, tense scrap series prices held steady and waited, while bare bright aluminum wire and aluminum extrusion scrap free of paint rose in tandem. Regarding price differences, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,360 yuan/mt on August 11, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 1,260 yuan/mt. As primary aluminum prices continued to rise, aluminum scrap lacked sufficient upward momentum, causing these price differences to widen again. Secondary aluminum alloy and its downstream demand marginally weakened, and coupled with high inventories of wrought aluminum alloy scrap raw materials such as doors and windows in Henan and other regions, the price transmission mechanism for aluminum scrap was obstructed, with upward momentum clearly insufficient. Affected by the traditional consumption off-season, downstream cast aluminum alloy enterprises saw their operating rates continue to decline and order scales shrink, leaving the aluminum scrap market without substantial support. Looking ahead, the supply-demand mismatch pattern is unlikely to reverse in the short term. Scrap utilization enterprises will most likely maintain just-in-time procurement and low-inventory operation strategies, making it difficult for market trading sentiment to improve substantially. The price of shredded aluminum tense scrap based on aluminum content is expected to be dragged down by stagnant raw material prices and sluggish downstream demand this week, remaining under pressure overall, with mainstream trading expected to center around 20,200-20,800 yuan/mt.
Secondary Aluminum Alloy: Spot market: Today, ADC12 market quotes consolidated on a strong note, with the SMM average price edging up by 50 yuan/mt. Some enterprises followed up by raising prices 100 yuan/mt, supported by high raw material costs and strong aluminum prices. However, end-use demand remained in the high-temperature off-season, with downstream buying mainly just-in-time procurement, leading to limited improvement in transactions, while some enterprises stayed steady and waited for now. In the short term, cost support remains solid, leaving limited downside room for prices, but the demand side significantly caps gains. ADC12 is expected to continue its consolidative pattern where cost support and demand constraints coexist, with any upside still awaiting a substantial recovery in end-use consumption.
Comprehensive Outlook:Divisions persist in the Middle East situation. Although the US Fed did not raise rates in July, its overall stance remains hawkish. The fundamental gap continues, and aluminum ingot inventory keeps destocking. In the short term, aluminum prices are expected to consolidate on a strong note.
[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make decisions prudently and not substitute this for their own independent judgment. Any decisions made by clients are not related to SMM.]
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