Futures bullish pattern continues, short-term aluminium prices hold up well
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Futures: SHFE aluminium closed at RMB 24,320 per tonne, up 0.58 per cent, 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, signalling 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.
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Trading volume slightly expanded to 57,400 lots but remained at a low level. The suggested core trading range for SHFE aluminium is 23,900-24,500. LME aluminium closed at USD 3,364.5 per tonne, edging up 0.06 per cent, 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 aluminium 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 aluminium production remained basically stable this week, with the proportion of liquid aluminium rising 0.19 percentage points W-o-W. Outside China, with ongoing production ramp-ups of new projects and production resumptions, aluminium supply is expected to continue climbing. However, the global aluminium 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. Aluminium billet processing fees pulled back, weakening substitution demand for aluminium ingot. Inventory side, China’s aluminium social inventory extended its destocking trend this week.
As of Monday this week, China’s aluminium ingot social inventory destocked by 16,000 tonnes from last Thursday to 917,000 tonnes, and by 41,000 tonnes from last Monday, with the destocking pace narrowing further. Meanwhile, aluminium billet inventory accumulated slightly, with a W-o-W inventory buildup of 4,000 tonnes. Aluminium ingot inventory is expected to continue its destocking trend in the short term.
Primary aluminium market: In early trading, the SHFE aluminium 2608 contract continued to run at high levels. Prices above RMB 24,000 per tonne exerted some restraint on downstream procurement, while trading among traders was relatively active. Today, spot premiums for SHFE aluminium mainly transacted at RMB -8 to 40 per tonne against the 08-20 contract. In east China, the selling sentiment index closed at 3.16, up 0.01 W-o-W, while the purchasing sentiment index was 3.2, up 0.04 W-o-W.
As aluminium 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 aluminium prices, while large suppliers still held prices firm.
Ultimately, actual transaction prices in the central China market hovered around discounts of RMB 120-140 per tonne against the SHFE aluminium 08 contract. In central China, the selling sentiment index was 3.06, up 0.02 W-o-W, and the purchasing sentiment index was 2.95, down 0.01 W-o-W. Today, aluminium 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.
Aluminium scrap: Today, SMM A00 spot aluminium prices closed at RMB 24,100 per tonne, up RMB 110 per tonne W-o-W. In China’s aluminium scrap market, tense scrap series prices held steady and waited, while bare bright aluminium wire and aluminium extrusion scrap free of paint rose in tandem.
Regarding price differences, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was about RMB 2,360 per tonne on August 11, and the price difference between A00 aluminium and shredded aluminium tense scrap was about RMB 1,260 per tonne.
As primary aluminium prices continued to rise, aluminium scrap lacked sufficient upward momentum, causing these price differences to widen again. Secondary aluminium alloy and its downstream demand marginally weakened, and coupled with high inventories of wrought aluminium alloy scrap raw materials such as doors and windows in Henan and other regions, the price transmission mechanism for aluminium scrap was obstructed, with upward momentum clearly insufficient.
Affected by the traditional consumption off-season, downstream cast aluminium alloy enterprises saw their operating rates continue to decline and order scales shrink, leaving the aluminium scrap market without substantial support. Looking ahead, the supply-demand mismatch pattern is unlikely to reverse in the short term.
Scrap utilisation 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 aluminium tense scrap based on aluminium 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 centre around RMB 20,200-20,800 per tonne.
Secondary aluminium alloy: Spot market: Today, ADC12 market quotes consolidated on a strong note, with the SMM average price edging up by RMB 50 per tonne. Some enterprises followed up by raising prices RMB 100 per tonne, supported by high raw material costs and strong aluminium 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 aluminium ingot inventory keeps destocking. In the short term, aluminium prices are expected to consolidate on a strong note.
