Aluminum prices fluctuated rangebound on improved downstream consumption recovery

Overnight, the most-traded SHFE 2309 aluminum contract opened at 18700 yuan/mt and closed at 18675 yuan/mt, flat from the previous trading day. LME aluminum prices closed at $2181/mt overnight, an increase of $35.5/mt or 1.65%.

On the macroeconomic side, it is clear from the recently released minutes of the Federal Reserve's July policy meeting that most Fed members believe that there is a relatively high upside risk to inflation and further tightening of policy may be required. But there were also members supporting keeping interest rates at current levels, the first sign in a long time that policymakers were significantly divided on the course of action. Fundamentally, the amount of domestic ingot casting is still relatively small, lowering the possibility of concentrated arrivals in the short term.

Domestic social inventory of aluminum ingots will fall below the 500,000-mt mark soon. As the resumption of production in Yunnan comes to an end, products may gradually flow into the market. However, there are signs of improvement in consumption in mid-August, and the downstream inventory replenishment is active. The improvement in the consumption side supports the further destocking of aluminum product inventories and this will boost the market. SMM expects short-term aluminum prices to remain volatile. Attention will be paid to domestic aluminum inventory and downstream consumption.