Middle East situation volatile and uncertain, aluminium prices consolidate and adjust

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Futures: SHFE aluminium closed at RMB 23,030 per tonne, down 0.78 per cent. The price was below all key moving averages (MA5=23,035, MA10=23,135, MA30=23,359.83, MA60=23,399.08). The moving-average system was in a bearish alignment, and the weak pattern continued.

MACD indicators showed DIF=-196.09 and DEA=-260.78; the golden cross remained, but the histogram narrowed sharply to 129.39 (181.64 the previous day), indicating a rapid fade in bullish momentum and insufficient rebound strength. Trading volume expanded to 91,400 lots, but overall remained at a low level, with market divergence increasing somewhat.

The suggested core operating range for SHFE aluminium is 22,800-23,300. LME aluminium closed at USD 3,138.5 per tonne, edging up 0.08 per cent. The price was below all key moving averages (MA5=3,154.2, MA10=3,158.85, MA30=3,233.43, MA60=3,417.72). The moving averages were in a bearish alignment, and weakness continued.

MACD indicators showed DIF=-62.31 and DEA=-78.14; the golden cross remained, but the histogram narrowed to 31.66 (38.31 the previous day), with bullish momentum weakening. The suggested core operating range for LME aluminium is 3,100-3,160.

Macro front: The US military launched a new round of strikes against Iran. US President Trump posted on social media, hinting that the US military would launch tough retaliatory actions against Iran after casualties occurred in recent days. Iran’s Islamic Revolutionary Guard Corps said it carried out three-stage strikes on US military targets in Bahrain and Kuwait.

A senior Iranian source said mediators had proposed a 10-day ceasefire to discuss a plan to revive a temporary agreement between Iran and the US. Iranian Foreign Ministry spokesperson Baghaei confirmed receipt of the mediators’ proposal, saying whether talks could be held with the US would depend on whether the negotiations align with Iran’s national interests.

Fundamentals: Supply side, last week the proportion of liquid aluminium in China rose 0.37 percentage points M-o-M, mainly because aluminium billet processing fees performed well, lifting the share of direct supply of liquid aluminium, while aluminium ingot casting ingot output further contracted; outside China, amid continued progress in ramp-up production of newly commissioned projects and resume production projects, aluminium supply was expected to keep increasing.

Overall, however, the short-term global aluminium ingot destocking trend was expected to be difficult to reverse. Demand side, downstream processing sectors were in the traditional consumption off-season, with mixed performance across segments but mainly under pressure; the operating rate of leading downstream aluminium processing enterprises was 61.3 per cent, down 0.6 percentage points M-o-M.

As the SHFE/LME price ratio repaired, downstream export profits narrowed; with orders on hand being digested, exports were expected to provide weaker support to demand. Inventory side, this week China’s aluminium social inventory continued the destocking trend. As of this Monday, China’s aluminium ingot social inventory fell 2,000 tonnes from last Thursday to 1.022 million tonnes, down 25,000 tonnes from last Monday.

Primary aluminium market: The morning session saw the SHFE aluminium 2606 contract trading centre higher than the same period in the previous trading day. Influenced by the aluminium ingot supply side, some sellers held their offers firm. However, affected by the off-season, market purchasing sentiment remained weak, coupled with still ample circulating supply.

Transaction prices kept moving lower, with mainstream deals shifting from parity against the SHFE aluminium 08 contract to a discount of RMB 20 per tonne. Today, the selling sentiment index in east China was 3.16, up 0.05 from the previous trading day; the purchasing sentiment index was 2.92, up 0.02.

Today, aluminium futures rose amid disturbance from some market news, but the downstream processing enterprises in central China showed subdued purchasing sentiment, which significantly depressed the market transaction sentiment; however, suppliers demonstrated a clear willingness to hold prices firm, and the market offers were relatively high.

After the opening, as absolute prices rose again, traders adjusted their offers downward, and finally, the actual transaction prices in central China were in the range of a discount of RMB 120-150 per tonne against the SHFE aluminium 08 contract. Today, the selling sentiment index in central China was 3.03, up 0.04 from the previous trading day; the purchasing sentiment index was 3.00, down 0.03.

Secondary aluminium: Today, the SMM A00 spot aluminium price closed at RMB 23,190 per tonne, edging down RMB 30 per tonne from the previous trading day, while the aluminium scrap market remained stable overall. On the price difference front, on July 20, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was RMB 2,012 per tonne, while that between A00 aluminium and shredded aluminium tense scrap was RMB 698 per tonne, still at extremely low levels.

Supply side, constraints kept deepening, the impact of the reverse invoicing policy was further intensifying, and the scarcity of compliant invoiced aluminium scrap kept rising. In terms of imports, China’s aluminium scrap imports in June 2026 were approximately 133,000 tonnes, down 16.9 per cent YoY and 12.5 per cent M-o-M, declining for three consecutive months. In the 2026 from January to June, total imports amounted to 982,000 tonnes.

As overseas aluminium scrap offers kept pulling back, Guangdong province saw an increase in orders for aluminium scrap imports from Southeast Asia recently compared to before, and the import window further improved from earlier. However, new transactions were still mainly concentrated in some low-priced resources and long-term cooperative clients, and spot market trading activity remained limited.

The aluminium scrap market is expected to continue moving sideways at high levels. Supply side, the constraints from the reverse invoicing policy are hard to reverse in the short term, and the tightness in invoiced aluminium scrap will persist; import side, the combined effect of multiple bearish factors will gradually show in the coming months, and the replenishment of high-quality scrap from outside China will remain low.

Demand side, with the deepening off-season, downstream operating rates stayed low, end-user orders were hard to see substantial improvement, and scrap utilisation enterprises continued to purchase as needed, making it difficult for purchasing sentiment to notably improve. The price difference between A00 aluminium and aluminium scrap has narrowed to historical lows, significantly weakening the cost advantage of aluminium scrap over primary aluminium. If aluminium prices continue to fall, the substitution effect will accelerate and become more prominent.

Secondary aluminium alloy: Spot Market: The ADC12 market remained generally stable today, with the SMM ADC12 price unchanged from the previous trading day at RMB 24,100 per tonne. The secondary aluminium alloy market remained in its off-season, with limited release of downstream orders, end-user procurement staying at just-in-time levels, and overall subdued trading activity, providing insufficient demand-side support for price rises.

Meanwhile, aluminium prices moved sideways, aluminium scrap prices saw limited fluctuations, and the cost side showed no notable changes, offering similarly weak drivers for enterprise price adjustments. Under a supply-demand balance where both sides were weak, the market lacked new directional factors, and enterprises mostly adopted strategies of aligning with market conditions and maintaining stable prices for shipments.

Given that aluminium scrap supply remained relatively tight, cost support persisted, and a demand recovery still awaited the arrival of the traditional peak season, the ADC12 market is expected to maintain narrow-range consolidation in the short term, with prices staying largely stable, while future focus should be on aluminium price trends, aluminium scrap availability, and the pace of downstream order recovery.

Comprehensive outlook: Amid ongoing fluctuations in the Middle East situation, lingering market concerns over interest rate hikes, sustained supply recovery, and a destocking trend that is hard to reverse in the short term, aluminium prices are expected to consolidate with fluctuations in the near term amid a tug-of-war between longs and shorts. Future focus should be on the pace of Middle East production resumptions and the trajectory of geopolitical conflicts, LME aluminium ingot inventory changes, and the state of downstream processing orders in China.

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.