Market overview: Weak US June CPI and employment data temporarily cooled rate hike expectations, but the July 29 FOMC meeting maintained rates, and the steepening of the US Treasury curve still implies a "compensatory rate hike" pricing. This, combined with a strong USD and liquidity expectations, is exerting periodic pressure on the non-ferrous metals sector. The US-Iran conflict has seen twists and turns, with the US restarting full sanctions on Iran on July 8 and the Middle East conflict reigniting, providing intermittent geopolitical premium support for aluminum prices. Overseas smelter restarts, such as those of EGA in the Middle East, are progressing as planned but at a slower pace, delaying the expected recovery in overseas supply. The pace of destocking in domestic social inventories has accelerated significantly, falling to 953,000 tons on July 30, a weekly drawdown of 53,000 tons, while LME inventories continued to decline to a historic low of 266,300 tons.

Market analysis: On the macro front, market rate hike expectations are due for correction. If the Fed's policy path is re-anchored, it could amplify price volatility. On the supply-demand front, domestic capacity has hit the 45 million ton red line, meaning full production with no flexibility. June production was 3.744 million tons (up 2.18% year-on-year), with destocking providing support. Overseas, macroeconomic pressure persists, but the reality of low inventories is tight. It is expected that Shanghai aluminum's single-directional momentum is limited, and the Shanghai-London ratio's center of gravity will shift lower (holding a short ratio position, range 6.5-7.3), with the domestic-strong, overseas-weak pattern likely to continue. On the technical front, Shanghai aluminum has been in a volatile recovery from its late-June low to around 24,000 yuan per ton by the end of July. Since July 7, the three-line resonance has shifted to a consolidation market, with bearish energy marginally converging, awaiting directional guidance. A break below the key support level of 22,000 yuan per ton could trigger programmatic liquidations, amplifying market volatility.

Market judgment (one-month outlook): The Middle East restart is slow, geopolitical risks are recurring, alumina oversupply is pressuring prices, automotive cables provide support, while real estate and photovoltaics are a drag. The destocking slope slows during the off-season. The electrolytic aluminum price range is [22,800, 23,800] yuan per ton.

Market judgment (three-month outlook): Middle East disruptions gradually ease, overseas restarts are released, high profits ensure high supply is maintained, alumina supply remains loose, external demand is relatively strong, and destocking occurs during the peak season. The electrolytic aluminum price range is [22,000, 25,000] yuan per ton.

Review: Destocking Continues, External Conditions Were Stronger Than Domestic

Review: [22,249, 23,760], +2.34%, an increase driven by weak US June CPI/employment data cooling rate hike expectations, the July FOMC maintaining rates, and repeated Middle East geopolitical tensions. LME inventories continued to fall to a historic low of 266,300 tons, and overseas spot premiums were high, reinforcing the tight external environment's support for aluminum prices. Exports of unwrought aluminum and aluminum products in June were 711,000 tons, up 45.4% year-on-year, setting a new record high, offsetting weak off-season domestic demand and driving social inventories down to 953,000 tons.

Outlook: [22,000, 25,000], volatile. Restarts by entities like EGA are progressing as planned but at a slower pace, and the recurring situation in the Middle East has delayed the expected recovery in overseas supply, which remains the main theme of tight overseas conditions. The traditional off-season in July and August and the repair of the Shanghai-London ratio are compressing export profits, the destocking slope is slowing, and there is a risk of a decline in future export orders. Alumina is bottoming out, and coal price fluctuations are causing a marginal increase in smelting costs. High profits are maintaining full production, and supply is inelastic.

Supply: Capacity at Ceiling, Supply Inflexible

Electrolytic aluminum: Domestic production in June was 3.744 million tons (up 2.18% year-on-year, down 3.11% month-on-month). Operating capacity is approximately 45.55 million tons, already exceeding the 45 million ton capacity red line, with capacity utilization near 99%, making supply rigid and inelastic. Overseas restarts are slow. August marks the peak of the ramp-up for new domestic capacity, after which Yunnan may see minor production cuts in September-November due to the dry season.

Alumina: June metallurgical-grade production was 7.306 million tons (down 1.68% month-on-month, up 2.18% year-on-year). Built capacity is about 118.42 million tons. The release of new capacity in Guangxi has led to three consecutive months of surplus (a surplus of about 194,000 tons in June). August production is expected to be flat month-on-month. Costs are approximately 2,739 yuan per ton, and industry profits have turned negative. The August price range is 2,600-3,000 yuan per ton, bottoming out.

Profit: Electrolytic aluminum smelting profits are high but slightly lower, at about 6,743 yuan per ton in July, down 10% from June, but still at a high level in recent years.

Import/Export: The import window is closed (theoretical loss of about 3,400 yuan per ton), keeping primary aluminum imports low. Export profits are narrowing, and future export volumes may decline from highs. In summary, domestic capacity has hit the red line, supply is rigid at full capacity, overseas restarts are slow, and domestic supply is stable at high levels in August with limited marginal increments.

Demand: Off-Season Not Weak, Exports Provide Support

Building and Construction: From January to June, the cumulative year-on-year decline in real estate new construction starts was 22.4%; the decline in completions was 12.5%. The latest aluminum profile operating rate is 52.9%, a seasonal off-season, but higher than 2024-2025.

Automotive: In June, new energy vehicle production reached 1.554 million units, up 22.4% year-on-year, with a penetration rate of 56.9%. Automotive remains one of the strongest demand sectors. However, the combination of purchase tax pre-spending and the off-season means limited growth in automotive aluminum use in the second half of the year.

Electronics and Power: State Grid's fixed asset investment in the first half of the year exceeded 310 billion yuan, up 12.6% year-on-year, with investment in new power grids up 13.5%. Demand for power cables is high. The copper-aluminum ratio remains high at around 4.2 (4 is the economic substitution threshold), and aluminum substitution for copper is advancing in the power sector. The latest aluminum cable operating rate is 63.9%, higher than the same period last year, with new power grids supporting cable demand. However, the July-September period is a gap for UHV projects, and the aluminum cable operating rate is slightly declining from highs.

Exports: June aluminum product exports were 710,000 tons (up 45.4% year-on-year, up 127,000 tons month-on-month), a significant unexpected increase. However, attention must be paid to the risk of the post-July Shanghai-London ratio repair closing the export tax arbitrage window and marginal contraction in new orders. In summary, the off-season domestic demand is weak but shows more resilience than expected. New energy vehicles, power grids, and photovoltaics support rigid demand, while the surge in aluminum product exports provides the most significant marginal support. Overall demand is "off-season but not weak."

Supply-Demand: Tight Balance, Destocking, Elevated Volatility

High supply: Supply is rigid: capacity at ceiling, full production. Demand is not weak: Demand shows resilience: off-season not weak, exports provide support. Off-season, low levels: Inventory destocking: social inventories at 953,000 tons, LME at a historic low. The balance sheet is tight: Tight balance and destocking expected for the next three months.

Risk Warnings for the Short Term

In the short term, several uncertainties could impact aluminum prices and the industry chain. First, if inflation data exceeds expectations again, leading to increased rate hike expectations, a stronger dollar and rising real interest rates could suppress non-ferrous valuations and end-user demand, disrupting aluminum price elasticity. Second, the US-Iran negotiations might face setbacks or even collapse. If the conflict escalates, it would push up energy and freight costs, disrupt the rhythm of Middle East aluminum smelting and logistics recovery, increase costs, and amplify global supply volatility. Third, the risk of a global growth downturn or recession could weaken external demand and corporate restocking intentions, dragging down aluminum product exports and domestic demand recovery, thereby eroding fundamental support. Fourth, domestic policy tightenings and adjustments (such as controls on high-energy-consuming industries, trade bill rectification, and changes to export tax rebates) could affect the pace of electrolytic aluminum processing, the efficiency of trade chains, and the structure of export profits, creating operational uncertainties. Fifth, technically, if prices break below key support levels again (such as the previous 22,000 yuan per ton level), it could trigger programmatic liquidations and a contraction in risk appetite, amplifying market volatility.