CPI in line with expectations eases macro anxiety, continued destocking provides price support

The image used in this article is generated with an AI tool and does not depict any real-time moment

Futures: SHFE aluminium closed at RMB 24,195 per tonne, down 0.62 per cent, with prices falling below MA5 (24,187) but still above MA10 (23,961), MA30 (23,435) and MA60 (23,708). Short-term moving average support is facing a test, but the medium-term bullish structure remains intact. The MACD indicator showed DIF=224.4 and DEA=128.3, maintaining a golden cross, but the histogram narrowed to 192.2 (vs. 224.33 the previous day), and bullish momentum weakened somewhat.

Trading volume shrank further to 48,900 lots, and market wait-and-see sentiment was strong at high levels. The recommended core trading range for SHFE aluminium is RMB 23,800-24,500 per tonne. LME aluminium closed at USD 3,312 per tonne, edging down 0.05 per cent, with prices falling below MA5 (3,318.6) but still above MA10 (3,274.55), MA30 (3,198.73) and MA60 (around 3,326).

Short-term moving average support is facing a test, but the medium-term bullish structure remains intact. The MACD histogram narrowed to 41.42 (vs. 53.97 the previous day), and bullish momentum weakened somewhat. The recommended core trading range for LME aluminium is USD 3,280-3,340 per tonne.

Macro front: The latest US inflation data were released. Data released by the US Department of Labour showed that US July unadjusted CPI YoY growth slowed to 3.4 per cent, core CPI Y-o-Ygrowth slowed to 2.5 per cent, seasonally adjusted CPI rose 0.1 per cent M-o-M, and core CPI rose 0.2 per cent M-o-M, all in line with market expectations. After the data release, traders' expectations for a US Fed interest rate hike in September remained broadly steady.

Fundamentals: Supply side, China's weekly aluminium production was basically stable this week, and the proportion of liquid aluminium rose 0.19 percentage points W-o-W. Outside China, with new projects ramping up production and production resumptions continuing to advance, aluminium supply is expected to keep rising. However, the global aluminium ingot destocking trend is unlikely to change in the short term.

Demand side, the downstream processing industry is in the traditional consumption off-season, and overall operating rates are under pressure. Aluminium billet processing fees pulled back, reducing substitution demand for aluminium ingot. Inventory side, China's aluminium social inventory continued its destocking trend this week.

As of Thursday, China's aluminium ingot social inventory fell by 19,000 tonnes from Monday to 898,000 tonnes, and by 35,000 tonnes from Thursday last week. Aluminium ingot inventory is expected to continue destocking in the short term.

Overseas supply side, UAE EGA's semi-annual results report disclosed the production resumption progress at the AlTaweelah aluminium smelter, which was shut down after an attack on March 28. Of the plant's 1,262 pots, 18 per cent have been restarted, and production is expected to return to pre-incident levels in Q1 2027. The alumina refinery's H1 2026 production fell significantly YoY, and capacity recovered to 50 per cent of pre-incident levels in early July.

Primary aluminium market: In early trading, the SHFE aluminium 2608 contract continued to run at high levels. Wuxi saw relatively large warehouse withdrawals, while inbound volumes were relatively small due to temporary weather issues. Trading among traders was relatively active. The main transaction centre for SHFE aluminium spot premiums today was between RMB 8-10 per tonne and the August contract RMB +10 per tonne.

The shipment sentiment index in east China today was 3.17, up 0.02 day on day; the purchase sentiment index was 3.26, up 0.06 day on day. Aluminium futures prices rose for several consecutive days. Buying sentiment in central China remained sluggish throughout, as downstream processing enterprises were constrained by insufficient off-season orders and high in-factory inventories, combined with high aluminium prices; buying sentiment stayed low and showed a further weakening trend.

Aluminium prices rose and premiums and discounts moderated somewhat, so suppliers' willingness to sell recovered slightly. In the end, actual transaction prices in central China centred around discounts of RMB 100-140 per tonne against the SHFE aluminium August contract. The shipment sentiment index in central China today was 3.09, up 0.03 day on day; the purchase sentiment index was 2.93, down 0.01 day on day. Futures continued to surge today, while spot in south China was hit by multiple pressures.

High absolute prices plus high premiums drove suppliers to sell aggressively for cash, and there was even a brief bout of stampede-like selling; the downward trend in premiums and discounts was hard to contain. Meanwhile, demand-side absorption had significantly weakened: downstream users only maintained the most basic passive just-in-time procurement, while traders entered only slowly to push for lower prices and buy on dips. In addition, localised bearish sentiment picked up, further amplifying the supply-demand imbalance at both ends.

Mainstream quotations were at discounts of RMB -30 to -10 per tonne; deep-discount cargoes were rampant in circulation, and there were even some extremely low-priced sell-offs, with the market gradually showing signs of being quoted but barely traded. Spot transaction prices were concentrated at premiums of RMB 100 per tonne to RMB 140 per tonne against the SHFE aluminium 2608 contract.
Aluminium scrap: Today, the SMM A00 spot aluminium price closed at RMB 24,370 per tonne, up sharply by RMB 270 per tonne from the previous trading day. China's aluminium scrap market broadly followed the increase, with aluminium tense scrap prices generally up RMB 100 per tonne, while bare bright aluminium wire, aluminium extrusion scrap free of paint, and other similar materials rose by RMB 200-300 per tonne.

In terms of price spreads, on August 12, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was around RMB 2,360 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was around RMB 1,260 per tonne. As primary aluminium prices continued to rise, aluminium scrap lacked momentum to follow, and the price spread widened again.

Secondary aluminium alloy and its downstream demand weakened at the margin; combined with high inventories of wrought aluminium alloy scrap raw materials such as doors and windows in Henan and other areas, the price transmission mechanism for aluminium scrap was hindered, and momentum to follow price increases was clearly insufficient. Affected by the traditional consumption off-season, operating rates at downstream cast aluminium alloy enterprises continued to decline, order volumes shrank, and the aluminium scrap market lacked substantial support.

Looking ahead, the supply-demand mismatch is unlikely to be reversed in the short term. Scrap utilisation enterprises will likely maintain a purchasing-as-needed and low-inventory operating strategy. Market trading sentiment is unlikely to improve materially.

Shredded aluminium tense scrap prices based on aluminium content are expected to be dragged by stagnant raw material prices and weak downstream demand this week, remaining under pressure overall, with the mainstream trading range expected to centre around RMB 20,200-20,800 per tonne.

Secondary aluminium alloy: Spot market: Today, ADC12 market quotes held up well overall, and the SMM average price was raised by RMB 100 per tonne. Primary aluminium and aluminium scrap prices continued to rise, further strengthening raw material cost support and boosting market willingness to follow the increase, with solid support below prices.

However, end-users were still in the high-temperature off-season. Orders and consumption were mediocre, and downstream mainly made just-in-time purchases. Improvement in spot transactions was limited, and the demand side still exerted some pressure on price increases. In the short term, if futures and aluminium scrap prices remain strong, ADC12 prices still have room to follow further gains, but weak demand will limit spot gains. The market is expected to continue a narrow sideways pattern with cost support and demand constraints coexisting.

Comprehensive outlook: Macro front, US July CPI and core CPI YoY growth rates slowed to 3.4 per cent and 2.5 per cent, respectively, both in line with market expectations. The mild pullback in inflation eased market concerns about further aggressive rate hikes by the US Fed. The short-term upward momentum of US Treasury yields weakened, and macro liquidity pressure moderated somewhat, providing staged support for aluminium prices.

The fundamental gap persisted, and aluminium ingot inventory continued to draw down. Overseas supply side, UAE's EGA disclosed the production resumption progress at the AlTaweelah aluminium smelter. Currently, 18 per cent of the plant's 1,262 pots have been restarted, and the production resumption pace was faster than the market had previously expected. The supply tightness premium priced earlier faces pullback pressure. In the short term, aluminium prices are expected to consolidate on a strong note, but upside room will be somewhat capped by production resumption expectations.

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.