PBOC releases easing signals, aluminium price upside room limited amid supply-demand and geopolitical game

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Futures: The most-traded SHFE aluminium 2609 contract closed at RMB 23,665 per tonne, unchanged from the previous day's settlement price, with a change of 0.00 per cent. The intraday opening was RMB 23,600 per tonne, and it fluctuated within a range of RMB 23,550-23,695 per tonne. The price traded above MA5 (23,519.00), MA10 (23,371.00), and MA30 (23,142.83), but below MA60 (23,787.83). The medium and long-term moving averages as a whole maintained a bearish alignment and continued to press downward. A consolidative repair structure at low levels emerged, with the 60-day moving average above acting as a key resistance. On the MACD indicator, the DIF (19.3006) stood above the DEA (-78.0446), and the MACD histogram bar value was 194.6903. Bearish momentum continued to weaken, while bullish repair momentum persisted. The suggested reference trading range for SHFE aluminium is RMB 23,400-24,000 per tonne. The LME aluminium 3M contract settled at USD 3,189.00 per tonne, down 0.19 per cent. The price traded above MA5 (3,180.40), MA10 (3,178.40), and MA30 (3,157.92), but below MA60 (3,366.95). The medium and long-term moving averages showed a bearish alignment and gradually pressed downward. Overall, a consolidative repair structure at low levels appeared, with the 60-day moving average above forming significant resistance. On the MACD indicator, the DIF (-24.4334) stood above the DEA (-39.6437), and the MACD histogram bar was 30.4207. Bearish momentum continued to fade, and the downward momentum slowed further. The suggested reference trading range for LME aluminium is USD 3,100-3,250 per tonne.

Macro front: The escalating US-Iran tensions took a dramatic reversal after a sharp rise. US President Trump stated that Iran and other Middle Eastern countries had requested a halt to attacks, and based on this request, he agreed to cancel military strikes. Trump said an agreement had been reached on the Strait of Hormuz, and denuclearization would also be agreed upon, with negotiations with Iran starting on Monday afternoon (Tuesday morning Beijing time). An Iranian military official called Trump's claim that Iran requested to stop attacks a "new lie." Iranian sources said the plan to reopen the Strait of Hormuz was purely a rumour. Iranian Foreign Minister Araghchi said that Iran and Oman held productive discussions on common principles and operational mechanisms for managing safe navigation in the Strait of Hormuz, with talks now in the final stage and nearing completion. Iranian Foreign Ministry spokesperson Baghaei stated that the Strait of Hormuz would never return to its pre-war state, and the current negotiations between Iran and Oman on the waterway are unrelated to the opening or closing of the strait. The People's Bank of China held its 2026 H2 work conference. The meeting emphasised the need to implement appropriately accommodative monetary policy, fully leverage the effectiveness of existing policies, promptly plan and introduce practical and effective incremental policies, step up counter-cyclical adjustments, redouble efforts to expand domestic demand and optimise supply, and solidly carry out key tasks in the second half of the year to promote sustained, improved, and higher-quality economic development.

Fundamentals: In overseas markets, production resumptions and new capacity of aluminium outside China continued to ramp up as planned. Expectations of a shift from tight to loose in the global aluminium market over the longer term persisted, continuously limiting the upside room for aluminium prices. However, the US-Iran conflict continued to escalate, and shipping disruptions in the Strait of Hormuz extended. The market feared that regional inflows of aluminium raw materials and outflows of finished aluminium products would be hindered. Coupled with rising crude oil, which pushed up overseas smelting energy costs, the regional geopolitical risk premium remained elevated. Supply uncertainty persisted, providing some bottom support for aluminium prices in the short term. On the domestic front, on the supply side, the proportion of liquid aluminium in China kept rising. On the inventory side, the social inventory of aluminium in China built up by 5,000 tonnes from last Thursday to 958,000 tonnes, and destocked by 21,000 tonnes from last Monday, with the destocking speed of aluminium ingot slowing down. In terms of exports, the SHFE/LME price ratio continued to recover last week. As of July 30, the ratio had rebounded to 7.4, up 13.8 per cent from the previous low of 6.5. Import losses narrowed to around RMB 3,300 per tonne, down more than 45 per cent from the previous peak loss of RMB 7,604 per tonne.

Primary aluminium market: In early trading, the SHFE aluminium 2608 contract moved near yesterday's price centre. Downstream players feared high aluminium prices, but as it was Friday, there was some just-in-time procurement. Additionally, with inventory destocking continuing, some suppliers were unwilling to sell at lower prices, but overall transaction prices shifted lower. Today, spot premiums for SHFE aluminium were mainly transacted between RMB 8-20 per tonne and flat against the August contract. Today, the east China selling sentiment index was 3.09, down 0.04 D-o-D; the buying sentiment index was 2.84, down 0.04 D-o-D. After three consecutive days of gains in SHFE aluminium futures, and coinciding with the Friday stockpiling cycle, downstream processing enterprises in the central China market significantly reduced their willingness to stockpile. They mainly focused on just-in-time procurement and digesting inventories, with only a few firms considering stockpiling. Traders mostly took advantage of low premiums to purchase, but overall market transactions remained sluggish. The actual transaction prices in the central China market were eventually centred around discounts of RMB 160-180 per tonne against the SHFE aluminium August contract. Today, the central China selling sentiment index was 3.20, up 0.02 D-o-D; the buying sentiment index was 2.83, up 0.03 D-o-D. Today, the futures market stopped rising and edged lower, while the south China spot market remained weak. Absolute prices stayed at high levels. Although the spot-futures spread was expected to weaken, it also remained high. With the weekend approaching and month-end, suppliers briefly held prices firm but then stepped up selling due to the desire to cash in at high levels. Mainstream quotes were at discounts of RMB 30-10 per tonne, showing varying degrees of decline, and discounted cargo was abundant. On the demand side, downstream fear of high prices remained, and procurement was weak. Traders pushed for lower prices and purchased minimal amounts, showing no flexibility beyond fulfilling orders. The oversupply pattern persisted, and overall transactions were rather moderate. Spot transaction prices were concentrated at premiums of RMB 85-125 per tonne over the SHFE aluminium 2608 contract.

Secondary aluminium raw materials: Today, SMM A00 spot aluminium prices closed at RMB 23,630 per tonne, flat MoM from the previous trading day, with aluminium scrap prices generally stable across all regions. Regarding the price spread between primary and scrap, on July 33, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan stood at around RMB 2,070 per tonne, while the price difference between A00 aluminium and shredded aluminium tense scrap was approximately RMB 860 per tonne. Amid the traditional off-season for consumption, scrap suppliers' willingness to sell at lower prices was generally low, keeping aluminium scrap prices largely firm. On the demand side, with the arrival of high-temperature holidays, operating rates at downstream cast aluminium alloy enterprises declined, and orders shrank; while operating rates at secondary aluminium plate/sheet and strip enterprises remained moderate, overall raw material demand clearly weakened compared to Q2. In the short term, the tight supply of compliant, invoiced cargo persists, and suppliers' reluctance to sell at lower prices provides bottom support for prices. On the import front, the lagged effects of the UAE's export ban and the EU's tariff surcharge policy are expected to materialise gradually in the upcoming months, with port arrivals staying low from June to August. On the demand side, the sluggish downstream orders are unlikely to improve in the short term. Scrap utilisation enterprises are very likely to continue purchasing as needed and maintain low inventory strategies, making a significant improvement in purchasing sentiment difficult.

Secondary aluminium alloy: Spot Market: Today, ADC12 market offers were largely stable. The cost side has yet to show notable changes, still providing some support to prices. However, demand-side performance remains weak, and insufficient orders are exerting certain pressure on the market, with some enterprises showing a slight willingness to cut prices. Under the dual influence of cost support and weak demand, prices lack sufficient upward momentum for further increases in the short term and the market is consolidating at highs. Future price direction will still depend on primary aluminium price trends and the recovery of downstream orders.

Overall outlook: The macro front improved recently, with expectations for US Fed interest rate hikes’ marginal constraint on the nonferrous metals sector continuing to ease. The proportion of liquid aluminium in China kept rising, and the domestic central bank will implement a loose monetary policy, strengthen counter-cyclical adjustments, and boost efforts to expand domestic demand, promoting sustained, positive, and broad-based economic development. Persistent geopolitical risk premiums in the Middle East jointly underpinned aluminium price operations, significantly bolstering market confidence in the short term. However, factors including the ongoing release of overseas aluminium capacity in the long term, recently weak traditional end-use demand in China, coupled with fluctuating expectations for US Fed interest rate hikes and uncertainties from Middle East geopolitical disturbances, still exert certain pressure on the upside room for aluminium prices.

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.