Strait risk continues to disrupt aluminium market sentiment, peak season stockpiling falls short of expectations, aluminium prices under pressure

The image used in this article is generated with an AI tool and does not depict any real-time moment

Futures: The most-traded SHFE aluminium 2610 contract closed at RMB 23,835 per tonne, up RMB 215 from yesterday's settlement price, an increase of 0.91 per cent It opened at RMB 23,800 per tonne during the session, fluctuating within a range of RMB 23,705-23,860 per tonne. The price is above MA5 (23,754.00), MA30 (23,620.50), and MA60 (23,637.50) but below MA10 (23,932.50). The medium and long-term moving averages are overall in a bearish arrangement, continuing to press downward, showing a structure of rebound followed by a pullback.

The 10-day moving average above constitutes key pressure. The MACD indicator's DIF (88.0859) is below DEA (125.7334), with the MACD green bar at -75.2949, indicating that the bulls' momentum has weakened. The core trading range for SHFE aluminium is suggested to be RMB 23,300-24,100 per tonne. LME aluminium 3M contract closed at USD 3,244 per tonne, up 0.05 per cent It opened at USD 3,239.50 per tonne during the session, fluctuating within a range of USD 3,239.50-USD 3,247.50 per tonne.

The price is above MA5 (3,225.50) and MA30 (3,216.77) but below MA10 (3,254.60) and MA60 (3,274.01). The medium and long-term moving averages are in a bearish arrangement and gradually pressing downward, showing an overall structure of retreat from highs and consolidation. The 60-day moving average above constitutes significant pressure. The MACD indicator's DIF (2.9630) is below DEA (5.5160), with the MACD green bar at -5.1059, indicating that the bulls' momentum has weakened. The core trading range for LME aluminium is suggested to be USD 3,200-USD 3,300/mt.

Macro front: Secretary of Iran's Supreme National Security Council Rezaei stated that if the US continues to wage economic war on Iran, no oil will pass through the Strait of Hormuz or even the Persian Gulf region. US President Trump previously announced the imposition of "the toughest economic action ever imposed on any country" against Iran, claiming it would be an unprecedented "economic war and economic isolation".

Iranian President Pezeshkian said that members of Iran's Supreme National Security Council all believe that the memorandum of understanding previously reached with the US is the best option that can be achieved based on dignity, wisdom, and national interests. However, Iran should also rationally extricate the country from the current state of "neither war nor peace".

Under the state of war, or "neither war nor peace", it is difficult for Iran to attract investment. Spokesman of the Iranian Parliament's National Security and Foreign Policy Commission, Kashkavi Hassan, announced that the committee passed Article 3 of the "Strategic Action Plan for Ensuring the Safety and Development of the Strait of Hormuz". According to this article, Iran will charge fees for maritime services, environmental services, fuel supply under special circumstances, insurance, safety, and other services.

Fundamentals: Supply side, domestic aluminium production remained steady last week, with the proportion of liquid aluminium pulling back slightly by 0.02 percentage points. Outside China, driven by new capacity and production resumptions, daily average production is expected to continue to recover.

Demand side, the traditional consumption off-season is nearing its end, but the expected stockpiling ahead of the peak season failed to materialise, while operating rates across downstream processing sectors came under pressure overall. Affected by US tariffs on silicon-based products, the market reported that orders for some PV extrusion enterprises showed signs of recovery, but the overall operating rate for PV extrusions did not improve significantly.

Inventory side, social inventory of aluminium ingot continued its destocking trend. As of Monday, inventory of aluminium ingot at major consumption areas in China stood at 860,000 tonnes, down 15,000 tonnes W-o-W from last Thursday and down 26,000 tonnes W-o-W from last Monday.

Primary aluminium market: SHFE aluminium futures stabilised, with no significant changes compared to the same period yesterday. In Wuxi, warehouse withdrawals performed well today, and suppliers generally held a bullish sentiment, with mainstream transaction premiums/discounts for A00 aluminium ingot ranging from a discount of RMB 10 per tonne to a premium of RMB 10 per tonne.

In east China today, the selling sentiment index was 3.21, up 0.01 W-o-W; the purchasing sentiment index was 3.23, up 0.07 W-o-W. Though aluminium futures stabilised, market transactions cooled. During the weekend stockpiling cycle, buying sentiment remained weak. Downstream processing enterprises in central China still preferred small just-in-time procurement and showed low willingness to stockpile.

Moreover, large traders held prices firm, keeping quotations at relatively high levels. Ultimately, actual transaction prices in central China ranged around a discount of RMB 40-70 per tonne against the SHFE aluminium September contract. Today in central China, the selling sentiment index was 3.12, down 0.02 W-o-W; the purchasing sentiment index was 2.9, unchanged W-o-W. Today, futures stopped falling and rebounded, while spot cargo in south China remained resilient.

Tightening arrivals combined with significant destocking boosted sellers' confidence strongly, especially among large-scale suppliers who actively tried to raise quotations and intended to slow down shipments. Meanwhile, absolute prices remained in a relatively mild range, limiting the space for single-side arbitrage cargo flows and reducing selling pressure. Mainstream quotations maintained premiums of RMB 0~+10 per tonne.

Demand side, downstream responded moderately to the price rebound, with a slight tendency to rush to buy amid continuous price rise, continuing to restock in volume. Traders gradually entered the market and increased purchases. The dual demand quickly shifted the market from relatively loose to tight, prompting large players to further raise prices and absorb cargo to make the market. The supply-demand pattern was clearly leaning toward a tight balance, with active intraday trading. Spot transaction prices were mainly concentrated at premiums of RMB 140 per tonne to RMB 180 per tonne against the SHFE aluminium 2609 contract.

Aluminium scrap: Today, SMM A00 spot aluminium prices closed at RMB 23,680 per tonne, up RMB 80 per tonne W-o-W from the previous trading day. The domestic aluminium scrap market prices remained broadly stable with a wait-and-see stance. Amid the continuous rise in primary aluminium prices, aluminium scrap prices fluctuated within a relatively limited range, hindering the price transmission mechanism.

However, as primary aluminium prices corrected recently, the resilience of aluminium scrap provided an opportunity for narrowing the price spread between A00 aluminium and aluminium scrap. On the import and export front, according to SMM customs data, China's aluminium scrap imports totalled approximately 119,600 tonnes in July 2026, down M-o-M from 133,000 tonnes in June, mainly due to the earlier inversion of the price spread between Chinese and overseas markets and shipment delays, keeping the replenishment of high-quality overseas scrap at a low level.

Affected by the UAE's aluminium scrap export ban and the EU's tariff hike policy, the contraction effect of supply from Europe and the Middle East continued to manifest, further consolidating Southeast Asia's position as a major supplementary source.

Next week, the aluminium scrap market is expected to continue the pattern of narrow-range consolidation under demand suppression and cost support. Currently at the tail end of the traditional off-season, downstream terminal orders are unlikely to see substantial growth. Scrap utilisation enterprises will continue purchasing as needed, maintaining a cautious procurement stance, with no significant pre-season effect yet. Access to follow-up orders for enterprises still requires observation. Shredded aluminium tense scrap (priced based on aluminium content) is expected to trade mainly in the range of RMB 19,900-20,700 per tonne.

Secondary aluminium alloy: Today, ADC12 market quotations were largely stable, with a few enterprises showing a slight intention to raise prices, but the overall adjustment range was limited, and the market's wait-and-see sentiment remained strong. In the short term, ADC12 prices are expected to move sideways. On the cost side, tight supply of compliant raw materials and high raw material costs, coupled with the closed import window and low industry operating rates, provide some support to prices, limiting downside potential.

However, the demand side remains the main constraining factor. Weak end-use consumption and insufficient downstream purchase willingness, along with the accumulation of finished product and social inventory at enterprises, further cap the upward momentum for prices. With cost support not yet significantly weakening and lack of substantial improvement in demand, short-term prices are unlikely to form a trend of increase. If the high-temperature off-season gradually ends and terminal orders and procurement demand show substantive improvement, ADC12 prices may regain upward momentum.

Comprehensive outlook: Macro sentiment is volatile, with the Middle East situation in a "neither war nor peace" state, frequently unsettling aluminium prices in China and overseas. On the fundamentals side, aluminium ingot inventory continues to destock, providing bottom support for aluminium prices.

However, the SHFE/LME price ratio has recovered, and with digestion of orders on hand, export demand is expected to gradually weaken. Domestic end-use performance is mediocre, and the transition node between off-season and peak season is not yet clear. The market has some concerns about peak-season demand. In the short term, aluminium prices are expected to consolidate on a subdued note.

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.