Aluminium ingot continue destocking underpins aluminium prices, market worries about weak demand in traditional "peak season"

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US retail sales and consumer confidence data weakened in July, and corporate inflation expectations pulled back slightly. Adjustments in overseas US Treasury operations, a consolidating US dollar, and expectations for US Fed interest rate cuts repeatedly disrupted the base metals sector.

CME data showed that the market’s mainstream view was that the US Fed was highly likely to keep interest rates unchanged in September–October, while there was still tail risk of further rate hikes. Geopolitical tensions between the US and Iran resurfaced with new developments.

US President Trump explicitly stated that he was not seeking to extend the memorandum of understanding with Iran and said there was “no timetable” for resolving the Iran issue, adding that he was “not in a hurry.” Iran issued a tough response in parallel. US Secretary of Energy Wright said the US would “fight a long war” against Iran, and Treasury Secretary Bessent hinted that new economic sanctions were about to be introduced.

Fundamentals side

Supply side, China’s weekly aluminium production held steady this week, while the proportion of liquid aluminium pulled back slightly by 0.02 percentage points; outside China, supported by new capacity commissioning and production resumptions, daily average production was expected to continue rebounding.

Demand side, the traditional consumption off-season was nearing its end, but expectations for peak-season stockpiling failed to materialise, and operating rates across downstream processing segments remained under pressure; affected by US tariffs on silicon-based products, market feedback indicated that orders at some PV extrusion enterprises showed signs of recovery, but overall PV extrusion operating conditions saw no meaningful improvement. Inventory side, destocking in aluminium ingot social inventory continued.

As of this Thursday, China’s aluminium ingot social inventory fell by 23,000 tonnes from last Thursday and by 11,000 tonnes from this Monday; aluminium billet inventory continued to build up, up 6,000 tonnes W-o-W. In the short term, the destocking trend in aluminium was expected to continue. Going forward, attention should be paid to the export performance of aluminium semis and aluminium products.

Overall, macro sentiment was volatile, frequently disrupting aluminium prices in China and overseas; on the fundamentals side, aluminium ingot inventory continued to destock, providing bottom support for aluminium prices; however, the SHFE/LME price ratio recovered, and as orders on hand were digested, export demand was expected to weaken gradually.

Domestic end-user demand was mediocre, and the market expressed some concerns about peak-season demand. In the short term, aluminium prices were expected to consolidate on a subdued note. Next week, the most-traded SHFE aluminium contract was expected to trade in the range of RMB 23,200–24,000 per tonnes; LME aluminium was expected to trade in the range of USD 3,150–USD 3,250 per tonnes. Going forward, close attention should be paid to the trend in China’s aluminium semis exports demand.

Note: This article has been issued by SMM and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.