Continued destocking of aluminium ingot inventory underpins, China's weak demand suppresses the rise of aluminium prices

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The most-traded SHFE aluminium 2610 contract closed at RMB 23,815 per tonne, up RMB 30 from yesterday's settlement price, an increase of 0.13 per cent. It opened at RMB 23,790 per tonne during the session, fluctuating in a range of RMB 23,780-23,940 per tonne. Prices traded above MA5 (23,712.00) and MA60 (23,624.75), and above the MA10 (23,881.00) and MA30 (23,633.50) moving averages.

The medium and long-term moving averages showed a bearish arrangement, continuing to press down, forming a retreat-from-highs consolidation structure, with the 10-day moving average serving as a key resistance level above. The MACD indicator showed DIF (76.4894) below DEA (114.9911), with the MACD green bar at -77.0035, indicating that the momentum of bulls continued to weaken. The core trading range for SHFE aluminium is suggested to be RMB 23,400-24,100 per tonne.

LME aluminium 3M contract closed at USD 3,218.50 per tonne, up 0.19 per cent, opening at USD 3,215 per tonne during the session, fluctuating in a range of USD 3,215.00-USD 3,222.50 per tonne. Prices traded above MA5 (USD 3,219.40) and MA30 (USD 3,217.43), and below the MA10 (USD 3,237.05) and MA60 (USD 3,264.45) moving averages.

The medium and long-term moving averages showed a bearish arrangement, gradually pressing down, forming an overall retreat-from-highs consolidation and correction structure, with the 10-day and 60-day moving averages providing clear resistance. The MACD indicator showed DIF (-0.9795) below DEA (3.8149), with the MACD green bar at -9.5887, indicating that the momentum of bulls weakened. The core trading range for LME aluminium is suggested to be USD 3,180-USD 3,300/tonnes.

US Treasury Secretary Bessent announced a series of economic sanction measures against Iran to further increase pressure on Iran. The US will expand the scope of secondary sanctions on countries with commercial dealings with Iran and urge relevant countries to make a choice. Iranian Parliament Speaker Qalibaf said that Iran's trading partners have stated they will "not take seriously" the relevant US sanctions rhetoric.

In response to "US threats of secondary sanctions on Iran's trading partners," the Ministry of Foreign Affairs stated that sanctions and pressure do not help solve problems, only escalate tensions and worsen the situation, which does not serve the interests of any party. China calls on all parties to remain rational and restrained, avoid actions that may further intensify conflicts and impact global economic development and financial stability, and return to the correct track of dialogue, negotiation, and political resolution as soon as possible.

The PBOC announced that on August 24, it conducted a 7-day reverse repo operation of RMB 340 billion via a fixed rate and quantity tender, fully meeting the demand of primary dealers, with an operating rate of 1.40 per cent, a bid volume of RMB 340 per tonne, and an award volume of RMB 340 billion.

Fundamentals: On the supply side, China's weekly aluminium production was stable last week, with the proportion of liquid aluminium pulling back slightly by 0.02 percentage points. Outside China, driven by new investments and production resumptions, daily average production is expected to continue to rebound. Demand side, the traditional consumption off-season is nearing its end, but the transition period between off-season and peak season has yet to appear, with operating rates of downstream processing sectors under pressure overall. Inventory side, the destocking trend of aluminium ingot social inventory continued.

This Monday, domestic mainstream consumption region electrolytic aluminium ingot inventory stood at 860,000 tonnes, down 15,000 tonnes W-o-W from last Thursday, and down 26,000 tonnes W-o-W from last Monday.

Primary aluminium market: The SHFE aluminium 2609 contract futures rose from the previous trading day, and downstream buying sentiment diminished somewhat. Trading sentiment among market traders was not active, and overall spot premiums transaction remained unchanged from the previous trading day.

SHFE aluminium 09 contract discount of RMB 10 per tonne to premium of RMB 10 per tonne. Today, trading atmosphere in central China market weakened W-o-W from last Friday. As aluminium futures rose, downstream processing enterprises' buying sentiment was low, and overall trading volume was weak.

Moreover, market quotations showed a continuous downward trend after market opening, and suppliers' willingness to hold prices firm was also low. Ultimately, actual transaction prices in central China market were centred around a discount of RMB 40-70 per tonne to the SHFE aluminium 09 contract. Today, futures continued to rise, while spot in South China moved in the doldrums. Arrivals increased M-o-M but have not yet translated into actual inventory buildup.

Low absolute inventory still provides some support for sellers. Most holders chose to control prices and release slowly, with only a few making small concessions. Mainstream quotations were at a discount of RMB -10 to 0 per tonne, with cargo flow generally under control. Demand side, downstream acceptance of rising prices was weak, with insufficient momentum to rush to buy, and rigid purchasing as needed remained the main theme.

Traders' just-in-time procurement was moderate, with strong willingness to accept non-premium invoices, but overall elastic demand was scarce. Both bulls and bears were cautious, with supply and demand in a tug-of-war, and intraday trading was lukewarm. Spot transaction prices were concentrated at a premium of RMB 135-175 per tonne to the SHFE aluminium 2609 contract.

Aluminium scrap: Today, SMM A00 spot aluminium price closed at RMB 23,800 per tonne, up RMB 120 per tonne from the previous trading day. Domestic aluminium scrap market prices were generally stable on wait-and-see, with a slight upward follow-through. Against the backdrop of continuously rising primary aluminium prices, aluminium scrap price fluctuations were relatively limited, and the price transmission mechanism was obstructed.

However, with the recent pullback in primary aluminium, the resilience of aluminium scrap prices provided an opportunity for the narrowing of the price difference between A00 aluminium and scrap. As for the price difference between A00 aluminium and scrap, on August 24, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was RMB 2,305 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was RMB 1,084 per tonne.

Trade side, according to SMM customs data, in July 2026, China's aluminium scrap imports totalled approximately 119,600 tonnes, down M-o-M from 133,000 tonnes in June. This was mainly affected by the previous inverted price spread between Chinese and overseas markets and shipping delays, with overseas high-quality scrap supply remaining low.

Affected by the UAE's aluminium scrap export ban and the EU's tariff hike policy, the contraction effect of European and Middle Eastern supply continued to manifest, further consolidating Southeast Asia's position as a major supplementary source. The aluminium scrap market is expected to sustain a narrow sideways pattern with demand suppression and cost support this week. Currently at the tail end of the traditional off-season, end-user orders are unlikely to see any substantial surge.

Scrap utilisation enterprises continue their purchasing as needed strategy, maintaining cautious procurement sentiment, and the pre-season effect for the peak season is not yet significant. Enterprises need to wait and see for subsequent orders. The main trading range for shredded aluminium tense scrap (priced based on aluminium content) is expected to move around the range of RMB 19,900 to 20,700 per tonne.

Secondary aluminium alloy:spot market: Today, spot market quotes were mostly stable, with tentative upward adjustments in some areas. Some enterprises considered raising prices by RMB 50 to RMB 100 per tonne, mainly driven by the recent rise in aluminium prices and raw material costs.

However, since end-use demand remains relatively weak, market transaction improvement was limited, and enterprises remained cautious about accepting orders after the price hike. Most enterprises opted to keep quotes stable and observe the market for now. Overall, cost support has strengthened somewhat, but demand-side constraints remain evident, and ADC12 prices will continue to consolidate at highs in the short term.

Comprehensive outlook: Macro sentiment fluctuates, and the Middle East situation has entered a "neither war nor peace" state, frequently disturbing aluminium prices in China and overseas. Fundamentals side, the destocking trend of China's aluminium ingot inventory continues, providing bottom support for aluminium prices.

However, overseas, driven by newly commissioned capacity and production resumptions, daily average aluminium production is expected to continue to rebound. The SHFE/LME price ratio is recovering, and as orders on hand are digested, export demand is expected to gradually weaken. In addition, domestic end-user demand in China is lacklustre, the transition period between off-season and peak season has not been clearly defined, and the market has some concerns about peak season demand. In the short term, aluminium prices are expected to continue to consolidate on a subdued note.

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.