Domestic and international aluminium prices weakened in tandem, geopolitical tensions eased, aluminium prices under pressure overall

Futures: The most-traded SHFE aluminium 2608 contract closed at RMB 23,425 per tonne, down 1.47 per cent. Prices traded below the MA5 (23,816.00), MA10 (23,952.00), MA30 (24,322.33), and MA60 (24,563.33) moving averages. The short- to medium-term moving averages were in a bearish alignment and pressing lower, with the overall structure notably in the doldrums and each of the moving averages above providing clear resistance.

The MACD DIF (-229.8268) was below the DEA (-166.5078), with the MACD histogram at -126.6379. Bearish momentum continued to be released, and the indicator signalled persistent weakness. The suggested core trading range for SHFE aluminium is RMB 23,300-24,000 per tonne. The LME aluminium 3M contract settled at USD 3,253.5 per tonne, down 0.18 per cent. Prices traded below the MA5 (3,332.80), MA10 (3,393.00), MA30 (3,554.55), and MA60 (3,540.95) moving averages.

The short- to medium-term moving averages were in a bearish alignment and pressing lower, with the overall structure notably in the doldrums and each of the moving averages above providing clear resistance. The MACD DIF (-77.2911) was below the DEA (-44.2061), with the MACD histogram at -66.1700. Bearish momentum continued to be released, and the indicator signalled persistent weakness. The suggested core trading range for LME aluminium is USD 3,250-3,450 per tonne.

Macro front: US President Trump said in a social media post that Iran had fully agreed to accept the highest level of nuclear inspections in the long term. In light of Iran’s "major concessions," the US allowed the Strait of Hormuz to remain open and will not implement a maritime blockade.

The Iranian funds unfrozen by the US would be used exclusively to purchase food and medical supplies from the US. However, Iranian Foreign Ministry spokesperson Baghaei stated that Iran would decide how to use its unfrozen assets solely based on national interests, without any restrictions.

Oman and Iran issued a joint statement on the Strait of Hormuz, saying both sides agreed to maintain dialogue to reach consensus on the future navigation management, services provided and associated fees for the Strait of Hormuz.

The statement noted that all arrangements related to the Strait of Hormuz must fully respect the sovereignty and sovereign rights of both countries. Bahraini, Iran’s Permanent Representative to the UN Office at Geneva, stated that the Strait of Hormuz is fully open to merchant vessels and no fees are charged.

Fundamentals: Outside China, the improving US-Iran situation and faster progress in resuming the opening of the strait, coupled with the strength in the US dollar index, accelerated the erosion of geopolitical premiums. Against the backdrop of easing tensions in the Middle East and high aluminium prices, new capacity outside China was released ahead of schedule. However, constrained by the characteristics of aluminium production, previously idled capacity in the Middle East is unlikely to resume production quickly in the near term. Domestic aluminium ingot inventory continued its destocking trend yesterday, with inventory in major consuming regions down 0.3 from the previous day, mainly in Guangdong and Wuxi.

Primary aluminium market: In the morning session, the SHFE aluminium 2606 contract fluctuated downward, with the overall trading centre lower than the same period of the previous trading day. Buying sentiment improved somewhat, influenced by the lower aluminium prices. However, as some sellers were keen to offload amid bearish expectations and some warrants were released, overall available supply was ample.

Mainstream quotations were at a discount of RMB 40 per tonne to the SHFE aluminium July contract, and transactions were mainly concentrated at a discount of RMB 50 per tonne. Yesterday, the selling sentiment index in east China was 3.1, up 0.15 from the previous day; the purchasing sentiment index was 3.06, down 0.14 from the previous day.

SHFE aluminium futures pulled back amid the volatile market. After the holiday, downstream processing enterprises in central China showed limited buying interest, still mainly digesting inventories, leaving overall transactions relatively sluggish. Premiums and discounts met expectations, and with a large outflow of warrants in recent days, market supply was significantly released, weakening suppliers' willingness to hold prices firm.

The actual transaction price range in central China eventually centred around a discount of RMB 80-110 per tonne against the SHFE aluminium July contract. Yesterday, the selling sentiment index in central China was 2.95, up 0.01 from the previous day; the purchasing sentiment index was 2.22, flat from the previous day.

Aluminium scrap: Yesterday, the SMM A00 price slipped RMB 70 per tonne from the previous trading day to RMB 23,870 per tonne. The aluminium scrap market edged down slightly, with some regions mainly taking a wait-and-see stance and prices remaining stable. On the refined-scrap price difference, on June 23, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan stood at RMB 2,287 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was RMB 1,636 per tonne.

Enterprises' tax costs increased by more than 2 per cent Y-o-Y. Continued narrowing of refined-scrap price differences reflects relatively strong bottom support for aluminium scrap. Supply side, supervision over the "reverse invoicing" policy continued to tighten, and the cancellation of tax rebates in some provinces and intensified tax inspections caused the cost of invoiced raw materials to climb. The price spread between Chinese and overseas markets remained inverted, with scarce low-priced high-quality import sources, further weakening the supplement to China.

Demand side, the off-season effect deepened. Downstream scrap utilisation enterprises operated at low rates, with weak follow-up in end-user orders. Enterprises maintained purchasing as needed and low inventory strategies, with cautious purchasing sentiment. The aluminium scrap market is expected to continue the pattern of high-level weak consolidation.

The scarcity of compliant invoiced supply persists, and coupled with expanding production cuts and suspensions, expectations of tighter aluminium scrap supply are strengthening, providing bottom support for prices. Demand side, orders for downstream secondary cast aluminium alloy remain sluggish, and purchasing support from wrought aluminium alloy has also weakened, with end-use consumption unlikely to see substantial improvement. The aluminium scrap market’s supply-demand weakness is unlikely to be reversed in the short term.

Secondary aluminium alloy: spot: Yesterday, the ADC12 market overall maintained a steady trend. SMM ADC12 was flat from the previous trading day at RMB 24,100 per tonne. Cost side, SHFE aluminium spot and aluminium alloy futures recorded limited fluctuations, with yesterday’s late-session rally corrected after an early-session pullback, providing insufficient directional guidance; meanwhile, aluminium scrap raw material prices were broadly stable, and the cost side did not see significant changes.

Demand side, downstream buying maintained a need-based pace, and market trading was moderate. In the absence of new bullish or bearish factors, enterprises generally adopted a wait-and-see strategy, focusing on stable-price shipments. ADC12 prices are expected to maintain sideways movement in the short term, with the market continuing to monitor aluminium price trends, changes in aluminium scrap costs, and downstream order situations.

Aluminium market summary: The geopolitical premium evaporated rapidly as the US-Iran peace agreement was implemented, and coupled with expectations of new overseas project startups, LME aluminium faces considerable short-term pressure.

The Fed’s dot plot signalled a hawkish shift, tilting the global macro front toward bearishness; the recent decline in oil prices also indirectly supported a stronger US dollar, adding downward pressure on aluminium prices. Domestically, the destocking pace continued to accelerate, but absolute inventories remained at relatively high levels. SHFE aluminium, in the absence of fresh macro bullish factors, followed LME aluminium and came under pressure. Aluminium prices are expected to continue in the doldrums in the short term.

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.