Futures: Last night, the most-traded SHFE aluminium 2509 contract opened at RMB 20,525 per tonne, with a high of RMB 20,525 per tonne, a low of RMB 20,435 per tonne, and closed at RMB 20,440 per tonne. Trading volume was 42,000 lots, and open interest was 224,000 lots. Last night, LME aluminium opened at USD 2,566.5 per tonne, with a high of USD 2,573.5 per tonne, a low of USD 2,565 per tonne, and closed at USD 2,570 per tonne.
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Macro: (1) A spokesperson for the European Commission stated that the EU will suspend the implementation of tariff retaliation measures against the US, which were originally scheduled to take effect on August 7, within six months. The EU will continue to cooperate with the US to finalise a joint statement on trade. (Bullish ★)
(2) San Francisco Fed President Mary Daly said that given the increasing evidence of a weakening job market and no signs of persistent tariff inflation, the timing for an interest rate cut is approaching. Daly stated that two 25-basis-point interest rate cuts this year still seem like an appropriate recalibration, and the important thing is whether to cut rates in both September and December, rather than whether the cuts will happen. (Bullish ★)
Fundamentals: (1) According to SMM statistics, during the period from July 28 to August 3, the total outflows from warehouses of aluminium billets in China were 47,500 tonnes, a decrease of 900 tonnes M-o-M. (Bearish ★)
(2) According to SMM statistics, during the period from July 28 to August 3, the total outflows from warehouses of aluminium ingots in China were 110,700 tonnes, an increase of 18,200 tonnes M-o-M. (Bullish ★)
(3) According to SMM statistics, on August 4, the inventory of aluminium billets in China's mainstream consumption areas was 151,000 tonnes, an increase of 4,000 tonnes from last Thursday and 3,500 tonnes from last Monday. (Bearish)
(4) According to SMM statistics, on August 4, the inventory of primary aluminium ingots in China's mainstream consumption areas was 564,000 tonnes, an increase of 20,000 tonnes from last Thursday and 31,000 tonnes from last Monday. (Bearish)
Primary aluminium market: Yesterday morning, the centre of SHFE aluminium futures first fell to around RMB 20,400 per tonne, below the daily average line, fluctuating rangebound, and then gradually recovered to around RMB 20,500 per tonne. Inventory buildup was evident in east China, with Wuxi's inventory increasing by 17,000 tonnes W-o-W.
Under the inventory buildup, large traders purchased at a discount of RMB 10 per tonne against the SMM average price, and the market trading discount continued to widen. Yesterday, SMM A00 aluminium was reported at RMB 20,480 per tonne, down RMB 40 per tonne from the previous trading day, with a discount of RMB 30 per tonne against the 08 contract, down RMB 10 per tonne from the previous trading day. In the central China market, discounts were larger in the early stage, and some cargoes were shipped to east China.
After the aluminium price fell, downstream consumption slightly recovered, and inventory experienced a small destocking. In the intraday market, trading was at a premium of RMB 10-20 per tonne against the SMM price. SMM central China A00 aluminium was recorded at RMB 20,370 per tonne against the SHFE aluminium 2508 contract, down RMB 20 per tonne from the previous trading day. The price spread between central China and Shanghai was RMB -110 per tonne, narrowing by RMB 20 per tonne from the previous trading day, with a discount of RMB 140 per tonne against the 2508 contract.
Recycled aluminium raw materials: Yesterday, the spot price of primary aluminium fell by RMB 40 per tonne compared to the previous trading day. SMM A00 spot aluminium closed at RMB 20,480 per tonne, while the overall aluminium scrap market prices remained stable. Currently, in the traditional off-season, downstream scrap utilisation enterprises are experiencing weak order releases, with procurement mainly driven by immediate needs.
Yesterday, the centralised quotes for baled UBC aluminium scrap ranged from RMB 15,150 to 15,650 per tonne (tax-exclusive), while the centralised quotes for shredded aluminium tense scrap (with water price) ranged from RMB 16,700 to 17,200 per tonne (tax-exclusive). Regionally, Shanghai, Jiangsu, Shandong, and other regions closely followed aluminium price movements, with price adjustments ranging from RMB 0 to 50 per tonne.
In Jiangxi, Anhui, Hubei, Guizhou, and other regions, price adjustments lagged behind aluminium price movements, with yesterday's quotes remaining unchanged MoM. It is expected that the price centre of the aluminium scrap market this week may further return to off-season levels. The bearish expectations for primary aluminium (such as macro pressure and high inventory levels) have not dissipated, coupled with the continued weak demand during the off-season, limiting the overall upside room for aluminium scrap.
However, the tight supply of raw materials still provides medium and long-term bottom support. Shredded aluminium tense scrap, supported by the supply side, has strong price resilience and is expected to fluctuate rangebound within RMB 16,500 to 17,000 per tonne (tax-exclusive). Baled UBC aluminium scrap, due to weak end-use demand, faces significant downward pressure, and prices may fall to RMB 15,000 to 15,500 per tonne (tax-exclusive).
Secondary aluminium alloy: On the futures market, yesterday, the most-traded cast aluminium alloy futures contract 2511 opened at RMB 19,870 per tonne. By the midday close, the futures market reached a high of RMB 19,945 per tonne and a low of RMB 19,800 per tonne, closing at RMB 19,895 per tonne, down RMB 55 per tonne or 0.28 per cent from the previous close, with bulls mainly reducing their positions. In the spot market yesterday, the SMM A00 aluminium price fell slightly by RMB 40 per tonne from the previous day to RMB 20,480 per tonne, while the SMM ADC12 price remained stable at RMB 20,000 per tonne.
Yesterday, aluminium prices continued to pull back, with aluminium scrap temporarily maintaining firm quotes. However, silicon prices continued to fall, with the oxygen-blown #553 silicon price dropping by RMB 250 per tonne from last Friday to RMB 9,450 per tonne, further weakening the cost support for secondary aluminium alloys.
Meanwhile, recent weak end-use consumption and reduced production due to high temperatures in some downstream sectors have led to order reductions at secondary aluminium plants and sluggish market transactions. However, the short-term supply of aluminium scrap remains tight, providing some support for prices due to high costs. Overall, cost support will continue to limit the downside room for prices, while high social inventory and persistently weak actual demand will suppress price upside. It is expected that the short-term ADC12 price will maintain a narrow and weak oscillating pattern.
Summary: On the macro front, the EU postponed tariff retaliation against the US, easing trade friction and strengthening expectations for a US Fed interest rate cut (possibly 50BP within the year), putting pressure on the US dollar and benefiting commodities.
On the fundamental front, in terms of supply, domestic operating aluminium capacity remained stable, with the proportion of liquid aluminium pulling back and an increase in casting ingot volume, leading to more market-available supplies and a continuous inventory buildup in social inventory, suppressing aluminium price upside. Demand side, downstream off-season sentiment persists, spot purchasing as needed remains sluggish, spot premiums lack upward momentum.
PV, NEV, and home appliance sheet sectors remain in the off-season. Despite declining aluminium prices, processing plants' orders on hand show no significant improvement trend. Inventory-wise, weekly outflows from warehouses of aluminium ingot increased by 18,200 tonnes, but aluminium billet outflows declined, with both ingot and billet inventories continuing to accumulate, highlighting invisible inventory pressure and off-season consumption suppression.
Short-term, under the off-season, inventory buildup expectations remain strong, spot premiums and discounts are in the doldrums, with pressure likely to persist. Future price breakthroughs depend on August's seasonal transition inventory trends and consumption recovery signals.
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