Aluminum prices fell by 5.68% in July

Aluminum prices continued to decline in July. According to the Commodity Market Analysis System of SunSirs, the average price of domestic aluminum ingots in the East China market on July 31, 2024 was 18,986.67 RMB/ton, a decrease of 5.68% from the market average price of 20,130 RMB/ton at the beginning of the month (July 1).

Reasons for the decline in aluminum prices in July

1. Overseas economic data has hit hard on expectations of interest rate cuts, and the market no longer fully expects the Federal Reserve to cut interest rates in November. At the macro level, international commodity prices have been suppressed, and non-ferrous metal prices have retreated.
2. Weakening overseas data triggers recession expectations, while CPI data gradually raises market expectations of a weakening US economy. The Federal Reserve's Beige Book shows that businesses expect future growth to slow down and the labor market to remain weak. The production of primary processed aluminum products in the United States has decreased, and the demand for aluminum ingots has maintained a low season performance.
3. Domestically, the economic data for the second quarter was released, with a GDP of 4.7%, which was lower than expected. Domestic downstream inventory replenishment was little, and inventory removal was not smooth. As of July 29th, the inventory of electrolytic aluminum in major domestic markets was 795,000 tons, unchanged from the inventory of 795,000 tons on June 3rd; Compared to July 1st, the inventory was 762,000 tons, with a cumulative inventory of 33,000 tons.

Summary of favorable factors in August

1. Domestic macro factors: Recently, the central bank has taken frequent easing measures, such as lowering the quoted interest rates for one-year and five-year loan markets. Subsequently, several banks announced the reduction of deposit interest rates, and some banks in Shanghai and Beijing began to lower mortgage interest rates. The National Development and Reform Commission and the Ministry of Finance issued the "Several Measures on Strengthening Support for Large scale Equipment Renewal and Consumer Goods Trade in", and arranged about 300 billion RMB of ultra long-term special treasury bond funds for support.
2. As of July 31st, the price of aluminum ingots had fallen to near the marginal cost, and the upstream raw material side was tight, which provided some support for the price.

Supply and demand dynamics in August

The Yunnan and Inner Mongolia projects had completed their resumption of production, and a factory in Sichuan planned to resume production of 12.5W by the end of July, with a planned duration of two months. The import window was temporarily closed.

Market outlook

As of July 31st, aluminum prices had fallen below the level of 19,000 RMB/ton, and downstream acceptance had increased. It is expected that aluminum prices may stabilize and stop falling in August.

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