Middle East tensions disturbed aluminium market, domestic and international aluminium prices diverged in fluctuating trends as they moved sideways

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Futures: SHFE aluminium 2607 contract closed at RMB 24,435 per tonne, up 0.49 per cent (RMB +120 per tonne). The price is currently running near key moving averages, having risen above MA5 (24,367.00) and MA10 (24,426.00), but still below MA30 (24,654.33) and MA60 (24,698.08). The moving averages overall remain in a bearish alignment, with limited short-term rebound strength and no clear reversal of the weak pattern.

The MACD indicator shows DIF = -95.1100, DEA = -84.0727, with the death cross continuing and the negative histogram at -22.0745, indicating that bearish momentum has weakened but still dominates. Trading volume was 78,407 lots, with moderate market trading activity; open interest was 289,755 lots, down 4,018 lots for the day, suggesting slight capital outflow and cooling sentiment for low-level positioning.

The suggested core trading range for SHFE aluminium is RMB 24,000-24,800 per tonne. LME aluminium 3M contract closed at USD 3,727.5 per tonne, down 0.13 per cent (-USD 5 per tonne). The price is running above MA5 (3,688.50), MA10 (3,662.85), MA30 (3,593.50), and MA60 (3,506.77), with short-, medium-, and long-term moving averages in a bullish alignment and a medium-term upward trend. The MACD indicator shows DIF = 50.6545, DEA = 43.0484, with the golden cross continuing and the histogram remaining in positive territory (15.2123), indicating that upward momentum persists. The suggested core trading range for LME aluminium is USD 3,700-3,800 per tonne.

Macro Front: In light of Israel's ongoing military operations in Lebanon, Iran has suspended communication with the US and plans to completely block the Strait of Hormuz while launching operations on other fronts including the Bab el-Mandeb Strait. Iran stated that no negotiations will be held until Israel ceases military operations in Gaza and Lebanon and fully withdraws from Lebanon. US President Trump, after speaking with Israeli Prime Minister Netanyahu, said that all hostilities between Israel and Hezbollah will cease immediately, and troops heading to Beirut have been ordered to withdraw.

US President Trump said he expects to reach an agreement with Iran "within the next week" to extend the current ceasefire arrangement and reopen the Strait of Hormuz. Trump said the negotiations are progressing well and expressed optimism about reaching a deal. The US May ISM Manufacturing PMI rose 1.3 percentage points to 54, expanding for five consecutive months and hitting a four-year high. New orders growth accelerated to a four-month high, the prices paid index pulled back slightly but remained near highs since 2022, and the employment index improved.

Fundamentals: The US-Iran ceasefire agreement has yet to materialise, the Middle East supply disruption pattern remains unchanged, and the rigid supply gap outside China continues to provide support for aluminium prices. China side, in May 2026 (31 days), China's aluminium production was up 2.1 per cent Y-o-Y and up 3.8 per cent M-o-M. Although the pace of end-use demand recovery in China remained slow, the widening aluminium supply gap outside China significantly boosted aluminium semis export demand from China, which in turn effectively supported liquid aluminium consumption in China and kept apparent consumption in positive growth.

The proportion of liquid aluminium in China edged up, with the share rising 1.1 percentage points M-o-M to 76.5 per cent, slightly above expectations at the beginning of the month, with the core incremental growth driven by stronger-than-expected export orders. Inventory side, on Monday, SMM aluminium social inventory was approximately 1.386 million tonnes, destocking 15,000 tonnes from last Thursday, with destocking continuing this week, though inventory remained at historically high levels for the same period.

Primary aluminium market: In early trading, the SHFE aluminium 2606 contract traded in a range, with the overall price centre moving lower from the previous trading day. Affected by low aluminium prices, some sellers' willingness to sell declined. On Monday, the market was mostly in wait-and-see mode, with overall downstream stockpiling sentiment declining. Mainstream spot quotes were at SMMA00 minus 10 to plus RMB 10 per tonne.  

Yesterday, the east China market shipments sentiment index was 2.93, down 0.02 M-o-M; the purchasing sentiment index was 2.91, down 0.49 M-o-M. Entering the June off-season, downstream processing enterprises in central China saw poor sustainability of subsequent orders, with low buying sentiment and sluggish overall market transactions. On the first day of the month, suppliers showed strong willingness to sell, with quotes continuing to decline.

Ultimately, the actual transaction price range in the central China market was between parity and a discount of RMB 20 to the central China price. Yesterday, the central China market shipments sentiment index was 2.86, flat M-o-M; the purchasing sentiment index was 2.23, down 0.01 M-o-M.

Aluminium scrap: Last Friday, SMM A00 price rose RMB 70 per tonne from the previous trading day, and the aluminium scrap market remained generally stable with a slight uptick. The aluminium scrap market is expected to continue to hold up well at high levels this week, with shredded aluminium tense scrap (priced based on aluminium content) mainstream price range maintained at 20,300-RMB 20,900 per tonne (tax exclusive).

Constraints from the "reverse invoicing" policy persisted, and the tight supply of compliant invoiced goods was unlikely to reverse in the short term; the lagged contraction effect of imported aluminium scrap had not been fully released, and subsequent port arrivals would continue to run at low levels.

However, with the off-season approaching, scrap utilisation enterprises faced concerns over the sustainability of subsequent orders, and incremental end-use demand remained limited. Going forward continued attention should be paid to policy compliance progress, the outcome of US-Iran war negotiations, and the status of imported cargo port arrivals.

Secondary aluminium alloy: Yesterday, the ADC12 market overall continued its stable price trend, with mainstream transaction prices remaining steady. The SMM ADC12 price was flat from the previous trading day at RMB 23,700 per tonne.  Currently, aluminium prices and aluminium alloy futures fluctuations are limited, downstream demand remains stable, supply and demand fundamentals have not shown significant changes, and enterprises have strong wait-and-see sentiment.

However, tight raw material supply has not been effectively alleviated, compliant aluminium scrap and invoiced sources remain in tight supply, and enterprise procurement costs face strong support. Overall, the short-term market lacks drivers for significant price adjustments, and ADC12 prices are expected to remain mostly stable, but against the backdrop of tight raw material supply and continuously strengthening cost support, the price centre still has certain upward expectations.

Comprehensive outlook: If the US-Iran ceasefire agreement materialises, it will significantly ease Middle East supply concerns, but repeated military frictions leave peace prospects uncertain, and short-term geopolitical premiums tend to converge but have not fully dissipated. Rigid supply gaps outside China support LME aluminium's relatively strong pattern, while China's inventory destocking continues but inventory levels remain at historical highs, limiting SHFE aluminium's upside elasticity, and the domestic-overseas divergence pattern continues in the short term.

Subsequent focus will be on whether China's inventory destocking accelerates, whether the US-Iran agreement can be formally signed, further clarity on the US Fed's interest rate path, and whether China is further regulating aluminium capacity operations. Overall, aluminium prices are expected to maintain a pattern of LME outperforms SHFE and move sideways 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.