Inventory destocking continues to support the futures, making it difficult for aluminium prices to break the consolidation range in the short term

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Futures: The most-traded SHFE aluminium contract opened at RMB 23,655 per tonne in the night session on August 19, hit a high of RMB 23,720 per tonne, a low of RMB 23,630 per tonne, and closed at RMB 23,685 per tonne, up 0.04 per cent from the previous close. After the sharp decline, futures consolidated at lows, with prices trading below the short-term moving averages MA5, MA10, and MA20, and tested the support around MA60 on the downside.

Trading volume during the session contracted somewhat, while open interest edged up, with bulls adding positions at the lows to contest the downside support. Technically, the 4-hour MACD death cross continued, with the green histogram bars remaining at high levels and bearish momentum not yet fully fading.

On August 19, LME aluminium opened at USD 3,215 per tonne, hit a high of USD 3,239 per tonne, a low of USD 3,185 per tonne, and closed at USD 3,238 per tonne, up 0.64 per cent from the previous close. After the previous day's sharp pullback, futures bottomed out and closed with a small bullish candlestick; the rebound was limited in strength, and prices remained below multiple medium-term moving averages.

Trading volume expanded on the day, while open interest declined, with the move driven by bears reducing positions and covering. Technically, the daily MACD red bars contracted to near the zero axis, with DIFF and DEA almost converging, intensifying the tug-of-war between longs and shorts and leaving the risk of a death cross intact.

Macro Front: On August 19, 2026, Comrade Yue Xiuhu, a member of the National Development and Reform Commission (NDRC) Party Leadership Group and Vice Chairman, presided over coordination and scheduling mechanism meeting for major projects under the "six networks." The meeting studied the establishment of a "2+3+N" coordination mechanism for the computing power network, new-type power grid, and next-generation communications network, aiming to intensify overall planning, form synergy, and jointly accelerate the construction of major projects.

The US Treasury announced an expansion of long-term nominal Treasury buyback operations. It will at least double the maximum size of a single liquidity support buyback operation for longer-term nominal coupon-bearing Treasuries to at least USD 4 billion, effective September 9, 2026. Buoyed by this, the yields on the US 10-year and 30-year Treasuries fell sharply.

US President Trump posted that Iran failed to seize the opportunity to reach an agreement, so he announced "the most severe economic actions ever imposed on any country" against Iran, calling it an unprecedented "economic war and economic isolation."

Fundamentals: The aluminium extrusion industry is in the off-season. Downstream enterprises are prioritising the delivery of urgent orders, while the hot weather has further reduced the construction time for downstream projects. Large aluminium extrusion plants have sufficient orders on hand to maintain stable operations, while small and medium-sized manufacturers are proactively controlling the intake of new orders, prioritising cash flow health.

This week, the operating rate of construction aluminium extrusion continued to decline, and the industrial aluminium extrusion segment also weakened, with insufficient new orders for general-purpose industrial aluminium extrusions and a slight decline in operating rates.

The industry is currently in a state of low prosperity, with no clear signals of downstream stockpiling for the peak season yet. Inventory side, China's mainstream consumption area aluminium ingot inventory stood at 875,000 tonnes this Thursday, destocking by 11,000 tonnes W-o-W from Monday and 23,000 tonnes W-o-W from last Thursday.

Primary aluminium market: The SHFE aluminium 2609 contract futures centre moved lower today compared to the same period yesterday. Sustained arrivals in east China prompted active selling sentiment, making it difficult for spot discounts in the region to narrow significantly. Today, A00 aluminium ingot spot premiums were transacted at discounts of RMB 40 per tonne to parity.

The SHFE aluminium futures pulled back, but trading sentiment in the central China market remained sluggish. With the off-season deepening, buying sentiment from downstream processing enterprises stayed subdued. Against the backdrop of falling aluminium prices, suppliers showed strong intent to hold prices firm, yet overall trading volume remained low. Ultimately, actual transaction prices in the central China market centred around a discount range of RMB 90-120 per tonne against the SHFE aluminium 2609 contract.

 Futures dropped sharply today, but spot cargo in south China remained firm. With futures weakening and the spot-futures price spread having climbed to a relatively high level after yesterday's rise, the release of hedged cargo, including warrants, was notably ample. However, the reality of destocking continued to bolster sellers' confidence, and most sellers opted to control volumes and sell slowly rather than follow the decline with price cuts.

Mainstream quotations only edged down to discounts of RMB -10 to 0 per tonne, with overall supply largely under control. On the demand side, downstream users steadily restocked at lower levels, with incremental purchases released.

Traders, initially cautious and restrained due to fears of high premiums, gradually shifted toward increased efforts to secure cargo to meet rigid demand. Supply and demand improved amid divergence, and overall trading was satisfactory. Spot transaction prices were concentrated at premiums of RMB 75 per tonne to RMB 115 per tonne against the SHFE aluminium 2609 contract.

Aluminium scrap: Today, SMM A00 spot aluminium prices closed at RMB 23,670 per tonne, down another RMB 230 per tonne M-o-M from the previous trading day. Domestic aluminium scrap prices generally followed the decline, with regions that had previously held off on adjustments catching up with the downtrend today.

Against the backdrop of persistently rising primary aluminium prices, fluctuations in aluminium scrap prices were relatively limited, as the price transmission mechanism was hindered. However, as primary aluminium pulled back recently, the downside resilience of aluminium scrap provided an opportunity for the price difference between A00 aluminium and aluminium scrap to narrow.

Additionally, the supply side remained constrained by the "reverse invoicing" policy, and the scarcity of compliant, invoiced aluminium scrap provided bottom support for scrap prices. Current high-temperature holidays have yet to end, and downstream cast aluminium alloy enterprises' operating rates remain low, with order recovery still requiring time.

Scrap utilisation enterprises are highly likely to continue purchasing as needed and maintain low inventory strategies, with a concentrated restocking wave still to await. Notably, the price difference between A00 aluminium and shredded aluminium tense scrap has gradually widened, restoring some of the economic advantage of aluminium scrap over primary aluminium. The short-term aluminium scrap market is expected to continue moving sideways at relatively high levels, with weak end-use demand remaining the core factor suppressing prices.

Secondary aluminium alloy: Spot market: Today, the ADC12 market was generally weak, with most enterprises lowering prices by around RMB 100 per tonne, while a few temporarily maintained stable prices. The price weakness was mainly driven by the pullback in futures and primary aluminium prices, while end-use demand remained in the off-season with low purchasing enthusiasm, leaving the spot market lacking clear upward drivers.

However, the pullback in raw material prices such as aluminium scrap has been relatively limited, and the cost side still provides some support, resulting in an overall pattern of “weakening futures, tepid demand, and a cost floor.”

Comprehensive outlook: On the macro front, US July inflation data pulled back as expected, and July retail data weakened significantly. The consecutive soft economic data cooled market expectations for a US Fed rate hike in September, with the CME showing the probability of keeping rates unchanged in September rising to 65 per cent, while the probability of a cumulative hike by October remains near 50 per cent, leaving the debate over the terminal rate unresolved.

The fundamental deficit persists, with aluminium ingot inventory continuing to destock. On the supply side outside China, UAE’s EGA disclosed the progress of production resumptions at the Al Taweelah aluminium smelter. Currently, 18 per cent of the plant’s 1,262 pots have been restarted, and the pace of resumptions has accelerated compared to previous market expectations, pressuring the supply tightness premium previously priced in. In the short term, aluminium prices are expected to mainly consolidate, with upside room 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.