Weekly aluminium ingot destocking magnitude contracts, under the tug-of-war between longs and shorts in macro fundamentals, the aluminium price is expected to consolidate on a strong note in the short term

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Macro perspective:

Tensions between the US and Iran eased but major differences remain. Trump said negotiations between the two sides are underway, with the Strait of Hormuz expected to reopen on August 4; Iran and Oman reached a provisional agreement on a new shipping route, but emphasized it will not return to the pre-war state and denied a full reopening.

China's central bank made clear that H2 monetary policy will be moderately loose and will step up counter-cyclical adjustments; US Fed officials offered mixed signals, with an overall hawkish bias, indicating rates could rise if inflation stalls.

Fundamental side:

Supply side, China's weekly aluminium production was basically stable this week, with the proportion of liquid aluminium up 0.19 percentage point W-o-W. Outside China, driven by ongoing production ramp-ups at new projects and production resumptions, aluminium supply is expected to continue rising. However, the global aluminium ingot destocking trend remains unchanged in the short term.

Demand side, the downstream processing industry was in the traditional consumption off-season, with overall operating rates under pressure; aluminium billet processing fees pulled back, and replacement demand for aluminium ingot weakened. Inventory side, China's aluminium social inventory continued its destocking trend this week.

As of Thursday, China's aluminium ingot social inventory fell by 20,000 tonnes W-o-W from last Thursday and by 25,000 tonnes from this Monday, with the destocking pace narrowing further; meanwhile, aluminium billet inventory posted a slight buildup, up 4,000 tonnes W-o-W, and aluminium ingot inventory is expected to continue destocking in the short term.

In summary, differences over the Middle East situation persist. Although the US Fed did not hike rates in July, its overall stance remained hawkish. The fundamental deficit continued, with aluminium ingot inventory destocking ongoing.

Short-term aluminium prices are expected to consolidate on a strong note. Next week, the most-traded SHFE aluminium contract is expected to trade in a range of RMB 23,200–24,200 per tonne; LME aluminium is expected to trade in a range of USD 3,100–3,250 per tonne. Future attention should focus on the progress of production resumptions in the Middle East and the dynamics of new project commissioning plans.

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.