US-Iran conflict reignites, disrupting commodities; geopolitical premium helps SHFE aluminium shoot up on heavy volume

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Futures: The most-traded SHFE aluminium contract opened at RMB 23,190 per tonne in the night session on July 28, reached a high of RMB 23,535 per tonne, a low of RMB 23,130 per tonne, and settled at RMB 23,445 per tonne, up 0.97 per cent from the previous close. During this period, prices surged on strong volume to close as a bullish candlestick, breaking through the previous consolidation range and firmly holding above the MA5 (23,317.37), MA10 (23,269.85), MA20 (23,223.10), MA40 (23,234.24), and MA60 (23,338.15) moving average system.

The moving averages formed strong support, with the previous low of 22,875 serving as a solid support, and the price centre continued to move upward. Trading volume surged to 142,000 lots, while open interest rose to 260,000 lots, showing a characteristic of increasing bullish positions. Incremental capital drove the market upward. From a technical perspective, on the 4-hour MACD indicator, DIFF (43.04) was above DEA (26.38), with the histogram continuing to expand, indicating strengthening bullish momentum. The short-term trend held up well.

On July 28, LME aluminium opened at USD 3,169.5 per tonne, reached a high of USD 3,169.5 per tonne, a low of USD 3,130.5 per tonne, and settled at USD 3,148.5 per tonne, down 0.77 per cent from the previous close. The price consolidated and pulled back to close as a bearish candlestick, falling below the MA5 (USD 3,163.27) and MA10 (USD 3,165.42) short-term moving averages, which turned from support to resistance.

The MA20 (USD 3,181.95), MA40 (USD 3,252.74), and MA60 (USD 3,296.34) medium- and long-term moving averages were in a bearish alignment, with significant overhead pressure. Short-term support was seen at the USD 3,120 level. Trading volume increased, while open interest edged down, indicating a reduction in bullish positions with insufficient buying support.

Technically, on the daily MACD indicator, DIFF (-39.73) was above DEA (-54.98), preserving a bullish crossover, but the histogram was converging, suggesting weakening upward momentum. LME aluminium continued to consolidate on a subdued note.

Macro front: The market awaited the US and Iran pushing for peace negotiations, but the Strait of Hormuz dispute remained unresolved. However, this morning, crude oil prices surged again, with foreign media reporting that the US-Iran temporary ceasefire situation had changed again.

According to CME FedWatch: The probability of the Fed keeping rates unchanged in July was 69.5 per cent, with a 30.5 per cent chance of a cumulative 25-basis-point hike. The probability of the Fed keeping rates unchanged through September was 23.4 per cent, with a 56.4 per cent chance of a cumulative 25-basis-point hike and a 20.2 per cent chance of a cumulative 50-basis-point hike.

Fundamentals: Since late June, the SHFE/LME price ratio rapidly recovered, sharply closing the arbitrage window that had driven large-scale aluminium semis exports. As the transfer order effect gradually faded, new orders in some segments have declined, but previously committed fixed-price orders were still executed as planned.

Starting in July, aluminium plate/sheet and strip exports are expected to gradually pull back, with H2 average monthly exports falling to the 280,000-320,000 tonnes range. Combined with the strong H1 performance, full-year exports could still reach 3.3-3.4 million tonnes. In terms of inventory, aluminium ingot inventory in major consumption hubs fell 0.4 from the previous trading day on Tuesday, with destocking mainly occurring in Guangdong and Wuxi.

Primary aluminium market: The SHFE aluminium 2606 contract centre moved lower during the early session than the same period on the previous trading day. Affected by sluggish end-use demand, overall market purchases today were still primarily need-based restocking. Influenced by declining aluminium prices, some traders' willingness to sell waned to some extent, but the availability of circulating cargoes remained ample, and market acceptance of prices stayed at a weak level.

Mainstream transaction prices mostly ranged from a discount of RMB 10 per tonne to a premium of RMB 10 per tonne against the SHFE aluminium August contract. The selling sentiment index in east China today stood at 3.08, down 0.05 from the previous trading day, while the buying sentiment index was 3.00, up 0.06 from the previous trading day. Trading atmosphere in the central China market remained sluggish today, as the night session rebounded and downstream processing enterprises took a wait-and-see stance.

Off-season soft demand, combined with restrictions from safety inspections, left downstream plants with low purchase willingness, with only some traders engaging in small-scale restocking. Purchases of cargoes with current-month invoices by some traders, who had insufficient invoice quotas, drove up prices of such cargoes, but overall trading volume was limited.

Eventually, actual transaction prices in the central China market settled around a range of discounts of RMB 90-110 per tonne against the SHFE aluminium August contract. The selling sentiment index in central China today was 3.11, up 0.02 from the previous trading day, while the buying sentiment index was 2.86, down 0.05 from the previous trading day.

Aluminium scrap: Today, the SMM A00 spot aluminium price closed at RMB 23,200 per tonne, flat from the previous trading day, and the aluminium scrap market held overall steady. Regarding the price difference between A00 aluminium and aluminium scrap, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan on July 28 was approximately RMB 2,030 per tonne, while the price difference between A00 aluminium and shredded aluminium tense scrap stood at around RMB 710 per tonne, both continuing to run at historically extremely low levels.

On the import front, customs data showed that China's aluminium scrap imports totalled approximately 132,800 tonnes in June 2026, down from 152,000 tonnes in May, marking the third consecutive month of decline. Looking at cumulative data for 2026, total aluminium scrap imports from January to June amounted to approximately 981,800 tonnes.

Recently, import orders from Southeast Asia to the Guangdong region have increased. Although the import arbitrage window improved from the previous period, new transactions were mostly concentrated on low-priced cargoes, and overall spot market activity remained limited. Affected by the UAE's aluminium scrap export ban and the EU's tariff hikes, the contraction effect on high-quality imported aluminium scrap supply will become more apparent in the future. The aluminium scrap market is expected to maintain a narrow rangebound pattern this week, pressured by demand while supported by costs.

Against the deepening off-season backdrop, downstream end-use orders will show little substantive improvement, and scrap utilisation enterprises will continue their as-needed purchasing strategy, meaning a significant recovery in the purchasing atmosphere is unlikely. The mainstream trading range for shredded aluminium tense scrap (priced based on aluminium content) is expected to be around RMB 19,800-20,500 per tonne.

Currently, the price difference between primary and scrap aluminium has narrowed to a historical low, significantly eroding the cost advantage of aluminium scrap over primary aluminium. If primary aluminium prices subsequently decline further, the substitution effect of primary aluminium for scrap will accelerate and become evident, so close attention needs to be paid to the crowding-out effect of aluminium price trends on aluminium scrap demand.

Secondary aluminium alloy: Spot market: Today, ADC12 market quotes remained broadly stable. Cost side, aluminium scrap prices remained at high levels, coupled with relatively firm primary aluminium prices, providing some support to ADC12 prices; however, demand side was weak, as downstream enterprises gradually entered high-temperature holidays, orders decreased somewhat, and market trading activity declined.

Amid the dual impact of cost support and weak demand, ADC12 prices are expected to continue to move sideways in the short term. The market watches for the subsequent recovery of end-use demand and changes in raw material prices.

Outlook: The persistence of the Middle East geopolitical risk premium, combined with continued destocking of domestic aluminium ingots, jointly underpinned aluminium prices; however, the continuous release of overseas aluminium long-term capacity, weak traditional end-use demand in China, together with repeated expectations for US Fed interest rate hikes and uncertainty from the Middle East geopolitical situation, placed significant pressure on the upside room for aluminium prices. In the short term, aluminium prices maintained a consolidation pattern.

Futures: The most-traded SHFE aluminium contract opened at RMB 23,190 per tonne in the night session on July 28, reached a high of RMB 23,535 per tonne, a low of RMB 23,130 per tonne, and settled at RMB 23,445 per tonne, up 0.97 per cent from the previous close. During this period, prices surged on strong volume to close as a bullish candlestick, breaking through the previous consolidation range and firmly holding above the MA5 (23,317.37), MA10 (23,269.85), MA20 (23,223.10), MA40 (23,234.24), and MA60 (23,338.15) moving average system.

The moving averages formed strong support, with the previous low of 22,875 serving as a solid support, and the price centre continued to move upward. Trading volume surged to 142,000 lots, while open interest rose to 260,000 lots, showing a characteristic of increasing bullish positions. Incremental capital drove the market upward. From a technical perspective, on the 4-hour MACD indicator, DIFF (43.04) was above DEA (26.38), with the histogram continuing to expand, indicating strengthening bullish momentum. The short-term trend held up well.

On July 28, LME aluminium opened at USD 3,169.5 per tonne, reached a high of USD 3,169.5 per tonne, a low of USD 3,130.5 per tonne, and settled at USD 3,148.5 per tonne, down 0.77 per cent from the previous close. The price consolidated and pulled back to close as a bearish candlestick, falling below the MA5 (USD 3,163.27) and MA10 (USD 3,165.42) short-term moving averages, which turned from support to resistance.

The MA20 (USD 3,181.95), MA40 (USD 3,252.74), and MA60 (USD 3,296.34) medium- and long-term moving averages were in a bearish alignment, with significant overhead pressure. Short-term support was seen at the USD 3,120 level. Trading volume increased, while open interest edged down, indicating a reduction in bullish positions with insufficient buying support.

Technically, on the daily MACD indicator, DIFF (-39.73) was above DEA (-54.98), preserving a bullish crossover, but the histogram was converging, suggesting weakening upward momentum. LME aluminium continued to consolidate on a subdued note.

Macro front: The market awaited the US and Iran pushing for peace negotiations, but the Strait of Hormuz dispute remained unresolved. However, this morning, crude oil prices surged again, with foreign media reporting that the US-Iran temporary ceasefire situation had changed again.

According to CME FedWatch: The probability of the Fed keeping rates unchanged in July was 69.5 per cent, with a 30.5 per cent chance of a cumulative 25-basis-point hike. The probability of the Fed keeping rates unchanged through September was 23.4 per cent, with a 56.4 per cent chance of a cumulative 25-basis-point hike and a 20.2 per cent chance of a cumulative 50-basis-point hike.

Fundamentals: Since late June, the SHFE/LME price ratio rapidly recovered, sharply closing the arbitrage window that had driven large-scale aluminium semis exports. As the transfer order effect gradually faded, new orders in some segments have declined, but previously committed fixed-price orders were still executed as planned.

Starting in July, aluminium plate/sheet and strip exports are expected to gradually pull back, with H2 average monthly exports falling to the 280,000-320,000 tonnes range. Combined with the strong H1 performance, full-year exports could still reach 3.3-3.4 million tonnes. In terms of inventory, aluminium ingot inventory in major consumption hubs fell 0.4 from the previous trading day on Tuesday, with destocking mainly occurring in Guangdong and Wuxi.

Primary aluminium market: The SHFE aluminium 2606 contract centre moved lower during the early session than the same period on the previous trading day. Affected by sluggish end-use demand, overall market purchases today were still primarily need-based restocking. Influenced by declining aluminium prices, some traders' willingness to sell waned to some extent, but the availability of circulating cargoes remained ample, and market acceptance of prices stayed at a weak level.

Mainstream transaction prices mostly ranged from a discount of RMB 10 per tonne to a premium of RMB 10 per tonne against the SHFE aluminium August contract. The selling sentiment index in east China today stood at 3.08, down 0.05 from the previous trading day, while the buying sentiment index was 3.00, up 0.06 from the previous trading day. Trading atmosphere in the central China market remained sluggish today, as the night session rebounded and downstream processing enterprises took a wait-and-see stance.

Off-season soft demand, combined with restrictions from safety inspections, left downstream plants with low purchase willingness, with only some traders engaging in small-scale restocking. Purchases of cargoes with current-month invoices by some traders, who had insufficient invoice quotas, drove up prices of such cargoes, but overall trading volume was limited.

Eventually, actual transaction prices in the central China market settled around a range of discounts of RMB 90-110 per tonne against the SHFE aluminium August contract. The selling sentiment index in central China today was 3.11, up 0.02 from the previous trading day, while the buying sentiment index was 2.86, down 0.05 from the previous trading day.

Aluminium scrap: Today, the SMM A00 spot aluminium price closed at RMB 23,200 per tonne, flat from the previous trading day, and the aluminium scrap market held overall steady. Regarding the price difference between A00 aluminium and aluminium scrap, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan on July 28 was approximately RMB 2,030 per tonne, while the price difference between A00 aluminium and shredded aluminium tense scrap stood at around RMB 710 per tonne, both continuing to run at historically extremely low levels.

On the import front, customs data showed that China's aluminium scrap imports totalled approximately 132,800 tonnes in June 2026, down from 152,000 tonnes in May, marking the third consecutive month of decline. Looking at cumulative data for 2026, total aluminium scrap imports from January to June amounted to approximately 981,800 tonnes.

Recently, import orders from Southeast Asia to the Guangdong region have increased. Although the import arbitrage window improved from the previous period, new transactions were mostly concentrated on low-priced cargoes, and overall spot market activity remained limited. Affected by the UAE's aluminium scrap export ban and the EU's tariff hikes, the contraction effect on high-quality imported aluminium scrap supply will become more apparent in the future. The aluminium scrap market is expected to maintain a narrow rangebound pattern this week, pressured by demand while supported by costs.

Against the deepening off-season backdrop, downstream end-use orders will show little substantive improvement, and scrap utilisation enterprises will continue their as-needed purchasing strategy, meaning a significant recovery in the purchasing atmosphere is unlikely. The mainstream trading range for shredded aluminium tense scrap (priced based on aluminium content) is expected to be around RMB 19,800-20,500 per tonne.

Currently, the price difference between primary and scrap aluminium has narrowed to a historical low, significantly eroding the cost advantage of aluminium scrap over primary aluminium. If primary aluminium prices subsequently decline further, the substitution effect of primary aluminium for scrap will accelerate and become evident, so close attention needs to be paid to the crowding-out effect of aluminium price trends on aluminium scrap demand.

Secondary aluminium alloy: Spot market: Today, ADC12 market quotes remained broadly stable. Cost side, aluminium scrap prices remained at high levels, coupled with relatively firm primary aluminium prices, providing some support to ADC12 prices; however, demand side was weak, as downstream enterprises gradually entered high-temperature holidays, orders decreased somewhat, and market trading activity declined.

Amid the dual impact of cost support and weak demand, ADC12 prices are expected to continue to move sideways in the short term. The market watches for the subsequent recovery of end-use demand and changes in raw material prices.

Outlook: The persistence of the Middle East geopolitical risk premium, combined with continued destocking of domestic aluminium ingots, jointly underpinned aluminium prices; however, the continuous release of overseas aluminium long-term capacity, weak traditional end-use demand in China, together with repeated expectations for US Fed interest rate hikes and uncertainty from the Middle East geopolitical situation, placed significant pressure on the upside room for aluminium prices. In the short term, aluminium prices maintained a consolidation pattern.

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.