Macro expectations repeatedly disturb futures, weak expectations for peak season, aluminium prices are under pressure

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Futures: The most-traded SHFE aluminium contract opened at RMB 23,500 per tonne in the night session on August 20, hit a high of RMB 23,615 per tonne and a low of RMB 23,465 per tonne, and closed at RMB 23,520 per tonne, down 0.32 per cent from the previous settlement. Dragged by the LME's breakdown, futures weakened again, trading below all moving averages.

Trading volume shrank in the session, with open interest pulling back slightly, mainly driven by bulls reducing positions. Technically, the 4-hour MACD continued its bearish crossover, with green bars staying high, releasing bearish momentum.

LME aluminium opened at USD 3,234.5 per tonne on August 20, hit a high of USD 3,234.5 per tonne and a low of USD 3,177.5 per tonne, and closed at USD 3,185.5 per tonne, down 1.62 per cent from the previous settlement. The previous day's recovery failed to sustain, and the futures again moved unilaterally downward, breaking below all short-term moving averages. Open interest increased that day, with bears adding positions significantly, and bearish funds regained control. Technically, the daily MACD confirmed a bearish crossover, with green bars appearing, releasing bearish momentum.

Macro front: According to the CME "FedWatch": The probability of the US Fed keeping rates unchanged by September is 63.8 per cent, and the probability of a cumulative 25-bp rate hike is 36.2 per cent. The probability of the Fed keeping rates unchanged by October is 51.8 per cent, the probability of a cumulative 25-bp rate hike is 41.4 per cent, and the probability of a cumulative 50-bp rate hike is 6.8 per cent.

Fed's Daly said the rise in long-term yields is a global issue, weakening its indicative role for Fed policy signals, and believes there is no risk to the Fed's credibility. Short-term yields show the market understands the Fed's reaction mechanism, and the Fed's policy is in good shape, with no evidence seen to need an early rate hike. He expects the inflation shock to gradually fade, so he is "very supportive" of the Fed's decision to keep rates unchanged in July.

Fundamentals: Supply side, China's primary aluminium weekly production stayed stable this week, with the proportion of liquid aluminium pulling back slightly by 0.02 percentage points. Outside China, daily average production is expected to continue recovering, driven by new capacity and production resumptions.

Demand side, the traditional consumption off-season is near its end, but the expected pre-season stockpiling has not materialised, and operating rates at downstream processing segments are generally under pressure. Affected by US tariffs on silicon-based products, the market reported that orders at some PV extrusion enterprises have shown signs of recovery, but the overall operating rates of PV extrusion have not improved significantly. Inventory side, the destocking trend of aluminium ingot social inventory continued.

Primary aluminium market: Today, the SHFE aluminium futures trend was similar to the same period yesterday. Wuxi saw destocking today, consumer sentiment improved notably from yesterday, and spot discounts narrowed. Transactions today were around a spot discount of RMB 20 per tonne to RMB 0 per tonne against the SHFE aluminium September contract. Today, the shipment sentiment index in east China was 3.2, down 0.01 M-o-M; the purchase sentiment index was 3.16, up 0.04 M-o-M.

The aluminium futures adjusted slightly today, and trading sentiment in the central China market remained sluggish. Futures prices stabilised and stopped falling sharply, but downstream processing enterprises remained wait-and-see on purchases, with only some top-tier players maintaining small restocking. Suppliers showed a clear willingness to hold prices firm, so market quotations did not trend downward strongly.

Eventually, the actual transaction price range in central China was around a spot discount of RMB 70-90 per tonne against the SHFE aluminium September contract. Today, the shipment sentiment index in central China was 3.1, down 0.01 M-o-M; the purchase sentiment index was 2.9, unchanged M-o-M. The futures continued to fall today, while south China spot market stabilised with an improving trend.

The cumulative decline in absolute prices has been considerable, clearly breaking below the monthly moving average. Coupled with stable destocking and a notable single-day drop, these two positives made suppliers generally more reluctant to sell, and price adjustments and concessions almost disappeared. Mainstream quotations were at a premium of RMB 0~+10 per tonne, with the centre steadily rising, and supply tightened notably.

Demand side, downstream buyers kept increasing restocking at low prices, solidifying the demand bottom support. Spot supply was already limited, and traders who tried to push for lower prices found it difficult to find low-priced sources, eventually having to actively accept non-premium sources, and even small premiums were taken.

The supply-demand pattern tightened, and overall transactions were good. Spot transaction prices were concentrated at a premium of RMB 75-115 per tonne against the SHFE aluminium 2609 contract.

Secondary aluminium raw materials: Today, SMM A00 spot aluminium prices closed at RMB 23,670 per tonne, down RMB 230 per tonne M-o-M from the previous trading day.  China's aluminium scrap market prices generally followed the decline, with some regions that held a wait-and-see stance yesterday catching up with the drop today.

Against the backdrop of sustained high primary aluminium prices, the fluctuation range of aluminium scrap has been relatively limited, and the price transmission mechanism has been hindered. However, with the recent pullback in primary aluminium, the price resilience of aluminium scrap provides an opportunity for narrowing the price difference between A00 aluminium and aluminium scrap.

On August 20, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was RMB 2,360 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was RMB 1,150 per tonne.

On the import and export front, according to SMM customs data, China's aluminium scrap imports in July 2026 totalled approximately 119,600 tonnes, down M-o-M from 133,000 tonnes in June, mainly due to the inverted price spread between Chinese and overseas markets in the earlier period and shipment delays, with overseas high-quality scrap replenishment remaining low.

Affected by the UAE's ban on aluminium scrap exports and the EU's tariff hike policies, the contraction effect of supply from Europe and the Middle East continues to manifest, further solidifying Southeast Asia's position as a major supplementary source.

It is expected that next week, the aluminium scrap market will continue the pattern of demand suppression and cost support, moving sideways in a narrow range. Currently, we are at the tail end of the traditional off-season, and it is difficult for downstream terminal orders to see substantial growth.

Scrap utilisation enterprises continue their strategy of purchasing as needed, with a cautious procurement atmosphere, and the pre-season effect is not yet significant. Enterprises still need to wait for further observation on the intake of subsequent orders. The mainstream operating range for shredded aluminium tense scrap (priced based on aluminium content) is expected to be around RMB 19,900-20,700 per tonne.

Secondary aluminium alloy: Spot market: Today, the ADC12 market quotes remained generally stable, with SMM ADC12 prices holding steady at RMB 23,900 per tonne from the previous day. Futures and the cost side of aluminium scrap saw limited fluctuations, while aluminium prices saw a narrower decline.

The cost side still provide support to spot prices, and the momentum for further downward adjustments was insufficient. However, current end-use demand remains weak, and downstream purchasing is mainly based on rigid needs, with overall market transactions lacking significant improvement. Therefore, enterprises generally adopt a wait-and-see stance with stable prices. In the short term, ADC12 prices are expected to continue consolidating, and attention should be paid to aluminium price trends and changes on the demand side.

Comprehensive outlook: Macro sentiment repeats itself, frequently disturbing aluminium prices in China and overseas. On the fundamentals side, aluminium ingot inventory continues to see a destocking trend, providing bottom support for aluminium prices.

However, the SHFE/LME price ratio is to be repaired, and with the digestion of orders on hand, export demand is expected to gradually weaken. Domestic terminal end-use demand remains ordinary, and the market holds some concerns over peak-season demand. In the short term, aluminium prices are expected 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.