Macro support combined with inventory destocking, aluminium prices drift higher

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Futures: The most-traded SHFE aluminium contract opened at RMB 23,960 per tonne in the night session on August 14, with a high of RMB 24,000 per tonne and a low of RMB 23,835 per tonne, and closed at RMB 23,945 per tonne, up 0.25 per cent from the previous close. Prices pulled back to MA5 (23,988.91); short-term moving averages turned downward, with MA10 and MA20 forming overhead resistance, while MA40 and MA60 provided support below.

Open interest fell notably during the session, mainly driven by bears reducing positions. Technically, on the 4-hour chart, MACD DIFF crossed below DEA to form a bearish crossover, the green histogram expanded significantly, short-term bullish momentum faded rapidly, and prices entered a pullback phase. LME aluminium opened at USD 3,238.5 per tonne on August 14, with a high of USD 3,260 per tonne and a low of USD 3,221.5 per tonne, and closed at USD 3,245 per tonne, up 0.22 per cent from the previous close.

Prices consolidated at highs and ended with a small bullish candlestick; they pulled back from the prior high of USD 3,384.5 per tonne, found support after pulling back to MA20 (3,243.86), and traded below MA5 (3,268.58), while MA40 and MA60 continued to cap prices from above. Trading volume pulled back, while open interest increased, showing characteristics of bulls adding positions. Technically, on the daily chart, MACD DIFF (16.09) ran above DEA (5.41), the red histogram narrowed slightly, and bullish momentum weakened marginally.

Macro front: According to preliminary statistics from the central bank, the cumulative increase in aggregate financing to the real economy in the first seven months of 2026 totalled RMB 22.25 trillion, down RMB 174 billion from the same period last year. The US Department of Commerce announced on Friday that July retail sales fell 0.6 per cent M-o-M, the largest decline in more than a year, versus market expectations of a slight increase. Core control group sales excluding autos, building materials, and gas stations fell 0.4 per cent, the worst performance since January 2025.

The preliminary reading of the University of Michigan’s August consumer sentiment index released the same day came in at just 51, far below the expected 54.5. According to CME FedWatch: the probability that the US Fed will keep rates unchanged through September is 67.5 per cent, and the probability of a cumulative 25-bp hike is 32.5 per cent. The probability that the US Fed will keep rates unchanged through October is 53.3 per cent, the probability of a cumulative 25-bp hike is 39.8 per cent, and the probability of a cumulative 50-bp hike is 6.8 per cent.

Fundamentals: In July, the aluminium billet operating rate rose 1.1 percentage points M-o-M to 58.3 per cent, up 5.2 percentage points YoY. Benefiting from the strong performance of aluminium billet processing fees in Q2, China’s aluminium billet supply side continued its inertia-driven uptrend in July, with the operating rate hitting a year-to-date high and also standing at a high level for the same period over the past three years.

As the centre of aluminium prices rebounded markedly from lows in July, downstream operating performance and purchase willingness were constrained, and adjustments on the aluminium billet supply side showed a clear lag; China’s aluminium billets processing fees pulled back sharply from June highs and have now fallen below the industry’s average production cost line. Against the backdrop that most enterprises increased output or operated at full capacity during the month, weaker processing fees prompted a small number of aluminium billet producers to adjust their production strategies and choose to suspend or cut production ahead of time.

Looking ahead to August, SMM expected China’s aluminium billet supply side to retreat from highs, with the operating rate expected to pull back to around 56.9 per cent. In terms of inventory, as of this Monday, aluminium ingot inventory in China’s major consumption regions stood at 886,000 tonnes, down 12,000 tonnes W-o-W from last Thursday and down 31,000 tonnes W-o-W from last Monday.

Primary aluminium market: In early trading, the SHFE aluminium 2608 contract continued to trade at elevated levels. Prices above RMB 24,000 per tonne somewhat restrained downstream purchases, while transactions among traders were relatively active. Today, the centre of transactions for SHFE aluminium spot premiums mainly ranged between RMB 8-40 per tonne and RMB 08-20 per tonne.

Aluminium prices were cut consecutively, and with Friday coinciding with the stockpiling cycle, downstream processing enterprises’ buying sentiment in the central China market saw another slight correction from earlier. However, the overall market trading atmosphere remained sluggish; suppliers showed weak willingness to hold prices firm, and quotations continued to trend lower. Ultimately, the actual transaction price range in the central China market was around a premium of RMB 80-110 per tonne against the SHFE aluminium 09 contract.

Futures continued to plunge today, while South China spot adjusted in the doldrums. As prices fell and inventory returned to a destocking track, suppliers attempted to hold prices firm and sell in the morning; but as the bearish mood intensified toward the weekend and the willingness to cash out early gradually rose, most sellers made slight downward adjustments and offered concessions.

Mainstream quotations were at a discount of RMB -10 to 0 per tonne, with spot circulation relatively ample, though some still held to premiums and sold slowly. Demand side, downstream gradually shifted from initially expecting price declines, staying on the sidelines, and buying less to increasing replenishment on dips, though volumes were limited; in the trading segment, participants mainly pushed for lower prices to take in discounted cargoes, with only small volumes accepting higher offers to restock.

Amid the tug-of-war between supply and demand, overall trading was lukewarm. Spot transaction prices were concentrated at a premium of RMB 60-100 per tonne against the SHFE aluminium 2608 contract.

Aluminium scrap: Today, the SMM A00 spot aluminium price closed at RMB 23,870 per tonne, continuing to fall RMB 250 per tonne from the previous trading day, while China’s aluminium scrap prices generally followed with a drop of RMB 200 per tonne.

As for the price difference between A00 aluminium and aluminium scrap, on August 14, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was about RMB 2,250 per tonne and the price difference between A00 aluminium and shredded aluminium tense scrap was about RMB 1,150 per tonne, widening again W-o-W.

Against the backdrop of primary aluminium prices continuing to rise, aluminium scrap fluctuated within a relatively limited range, and the price pass-through mechanism was impeded, mainly constrained by two factors: first, marginal weakening in demand for secondary aluminium alloy downstream.

With high-temperature holidays overlapping with the traditional consumption off-season, cast aluminium alloy enterprises’ operating rates continued to decline and order volumes shrank; second, wrought aluminium alloy scrap inventories for door and window applications, among others, remained high in places such as Henan, weakening the elasticity of aluminium scrap price increases. In addition, policy constraints from reverse invoicing on the supply side continued, and the scarcity of compliant aluminium scrap with invoices provided a floor support for aluminium scrap prices.

Recently, the import window improved compared with earlier, and traders became more active in inquiries and purchasing. Shipments were expected to arrive successively in mid-to-late August, which was likely to improve import supply in the short term. The current high-temperature holiday had not yet ended, and downstream cast aluminium alloy enterprises kept operating rates at low levels.

Order recovery still needed time. Scrap utilization enterprises were highly likely to continue the strategy of purchase as needed and low inventories, and a concentrated restocking rally still had to wait. Notably, the price difference between A00 aluminium and shredded aluminium tense scrap had widened to RMB 1,150 per tonne, and the economic advantage of aluminium scrap versus primary aluminium recovered somewhat.

It was expected that the aluminium scrap market would maintain a pattern of high-level sideways moves in the short term, and weak end-use demand remained the core factor weighing on prices.

Secondary aluminium alloy: Spot market:  Today, overall ADC12 market quotations were lowered by RMB 200 per tonne. The price cut was mainly driven by factors including the pullback in aluminium prices, aluminium scrap prices falling in tandem and pulling costs lower, and weaker cast aluminium alloy futures, with cost support weakening somewhat.

Meanwhile, it was still the high-temperature off-season, and some downstream players had not fully resumed work. Orders and purchasing demand were weak, the spot market lacked sufficient support, and enterprises had limited willingness to hold prices firm. Under the combined impact of lower costs and weak demand, today’s ADC12 prices generally weakened in line with the market.

Overall outlook: On the macro front, US July inflation data pulled back as expected, and July retail data weakened sharply. Consecutively weak economic data significantly lowered market expectations for US Fed interest rate hikes in September. The probability of a September hike fell markedly, and the market began to trade expectations for the end of the hiking cycle.

The US dollar index was under pressure and weakened, providing macro support for LME metals. The fundamental gap persisted, aluminium ingot inventory continued to draw down, and on the outside China supply side, UAE’s EGA disclosed the production resumption progress at the Al Taweelah aluminium plant.

Currently, 18 per cent of the plant’s 1,262 pots had restarted, and the pace of resumptions was faster than the market had previously expected. The previously traded tight-supply premium faced pressure to give back. In the short term, aluminium prices were expected to consolidate on a strong note, but upside room would be somewhat capped by expectations for production resumptions.

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.