China's ingot inventory falls below 1Mt for the first time this cycle. SHFE decouples higher on FOMC decision day.中国铝锭库存本轮首次跌破 100 万吨;FOMC 决议日沪铝独立走强。

1 · Market Performance

Data SHFE aluminum, most-traded AL2609, Tuesday July 28 confirmed day-session close

• The most-traded contract has rolled to AL2609. It closed the July 28 day session at a confirmed 23,275 CNY/mt, +0.43% d/d (~+100 from July 27’s 23,175), with most-traded open interest up more than 4,000 lots — the latest confirmed print. For reference, July 27: AL2609 opened 23,195, high 23,250, low 23,105, average 23,178.59, close 23,175 (−45), volume 133,450 lots, open interest 251,167 (−1,858 d/d).
• The two boards split on the day: SHFE closed up, LME closed down 0.71%. SHFE’s driver is written on the inventory table — SMM major-consumption-area ingot inventory fell below 1 Mt to 979 kt on July 27, the first sub-1 Mt reading of the cycle. Rising open interest on a rising price means this was new length, not short covering (interpretation).
• Structure (est.): 23,275 sits above MA5 (~23,200), MA10 (~23,100), MA20 (~23,000) and MA40 (~22,950), and has crossed above MA60 (~23,050) — a bullish moving-average alignment and the strongest technical structure since early July.
• View At the time of writing, a live SMM snapshot showed the most-traded contract near 23,445 and LME near $3,152.5 — if accurate, that implies the July 28 night session extended gains toward the 23,400–23,450 area. The snapshot is unconfirmed and carried for direction only.

Data LME 3-month aluminum, Tuesday July 28 confirmed close

• Tuesday July 28 confirmed close ~$3,148.60/mt, −0.71% d/d (−$22.40; TradingEconomics caliber); an alternative vendor caliber prints $3,156.50 (−0.46%) — both are carried, and they agree on direction.
• Up ~1.57% over the past month and ~+20.73% YoY; the rebound off the early-July four-month low of $3,085 is not yet broken, but the $3,200 hard cap stands unbroken on three attempts and this is the first close back under MA5 in the rebound.
• Structure (est.): $3,148.60 has broken MA5 (~$3,171) and MA20 (~$3,163) and sits roughly on MA10 (~$3,145); it remains far below MA30 (~$3,235) and MA60 (~$3,380). Support is MA10 (~$3,140) then $3,120; resistance is MA20 (~$3,163) first, then $3,200.

View Level assessment

• SHFE sits near the top of its range (July range ~22,900–23,400) with the strongest technical structure, driven by domestic inventory; LME sits mid-to-lower range, having fallen back to MA10 once the oil premium left.
• What the divergence means: pricing power currently sits with China’s inventory table, not with ex-China macro. If SHFE holds above 23,300 in the night session while LME cannot defend $3,140, the internal/external ratio widens further and both the import window and the export arbitrage need repricing (interpretation).
• Direction hinges on tonight’s FOMC decision and the Warsh press conference (2:00am Beijing, July 30), the dollar (~101.39), whether LME stocks keep setting record lows, and whether China’s inventory keeps falling from 979 kt.

2 · Prices & Related Markets

Data/latest (SHFE and LME are July 28 confirmed closes; China spot is the July 28 Changjiang/SMM caliber)

• SMM A00 / Shanghai spot ingot: ~23,190 CNY/mt, flat ↔; Changjiang spot A00 average 23,200 CNY/mt (range 23,180–23,220), flat ↔; Wuxi 23,190 ↔; Nanhai (Foshan) 23,260, flat ↔ — quotes broadly steady, with holders firming offers and releasing metal slowly on dips.
• Spot premium/discount: discounts kept narrowing ↑ — holders were more willing to hold prices firm and downstream buyers still bought dips; but as futures swung, buyers reverted to the sidelines and sellers barely shipped, leaving overall turnover flat. A narrowing discount is itself confirmation of a tight spot market, but thin turnover says the narrowing is supply-driven (reluctance to sell), not demand-driven (restocking) (interpretation).
• LME aluminum: Tuesday $3,148.60 (−0.71%) confirmed ↓ (alternative caliber $3,156.50, −0.46%) — the first close back under MA5 in this rebound.
• LME stocks: 271,275 mt (July 24), the lowest in records back to January 1998 ↓; on-warrant 245,350 mt (lowest since April 2025).
• China ingot inventory (today’s core): 979 kt (July 27) ↓↓ — the first sub-1 Mt print of the cycle.
• ADC12 (secondary alloy): ≈24,100 CNY/mt, flat ↔; tight scrap plus a seasonally wide spread to primary lend cost support.
• Alumina: softness persists ↓ — futures most-traded AO2609 ~2,686 CNY/mt (July 28, −0.7%); SMM alumina index ~2,720 CNY/mt; regional spot (July 17 caliber): Shanxi 2,780, Henan 2,770, Shandong 2,740, Guangxi 2,650, national average ~2,737.6; four-market weighted ~2,548 — the lone laggard, still lowering the smelter cost floor. AO2609 was still 2,710 on July 20 (−2.03%); eight sessions later it is lower again.
• Crude: Brent ~$87.53 (July 28, −0.94%) ↓ — a fourth straight down session; Monday’s September contract settled at $88.36 (−8.7%) and WTI at $82.61 (−7.5%), the lowest closes since July 17 and July 16 respectively. The energy premium is fully cleared.
• Dollar index: ~101.39 (−0.03%) ↓ — easing back from a 15-month high as softer energy trimmed expectations for a rate hike this year; +0.20% over the past month, +1.58% over 12 months.

View

• Today’s price information is not in the levels but in the relative structure: SHFE up, LME down, discounts narrowing, inventory through 1 Mt — all four point at the same thing, China’s physical market is genuinely tightening while the ex-China board lacks a new marginal driver.
• But the cost side still drags: alumina at 2,686 passively widens smelter margins and keeps lowering the cost line — the most direct medium-term constraint on SHFE’s upside.

3 · Inventory

Data/latest

• China ingot (today’s headline): major-consumption-area electrolytic aluminum ingot inventory was 979 kt on July 27 — the first break below the 1 Mt level of this cycle; −27 kt vs the prior Thursday (July 24) and −43 kt vs the prior Monday. That is a cumulative ~486 kt drawdown from the early-May peak near 1.465 Mt; the July path runs 1.098 Mt (July 8) → 1.078 Mt (July 9) → 1.024 Mt (July 16) → 979 kt (July 27), multiple consecutive weeks of draws with no clear slowing in slope.
• LME stocks: 271,275 mt (July 24) — the lowest in LME records back to January 1998, below the August 2022 post-invasion low of 271,450 mt; equal to less than one day of global consumption; on-warrant stocks 245,350 mt, the lowest since April 2025. The July path runs ~298,775 mt in early July → 278,275 mt on July 22 → 271,275 mt on July 24. Cash holds a mild ~$20/mt backwardation to 3M, confirming near-term tightness.
• SHFE aluminum warrants: 395,143 mt on the July 10 weekly caliber, −11,871 mt (−2.92%) vs July 3 — trending lower in step. (This series lags; treat as trend only.)
• Billet: major-consumption-area social inventory ~121 kt on July 23, a second straight week of buildup; July 14–20 withdrawals were 33 kt, −9.1 kt WoW and −19 kt YoY; processing fees have pulled back to near the production cost line.
• Secondary aluminum alloy (foundry alloy) ingot social inventory ~25.9 kt — an 8th straight week of draws at a slowing pace, with tax-invoice circulation a constraint.

View

• “1 Mt” going from expectation to print is the second upgrade to this bull case in a week: last week’s upgrade was ex-China (LME stocks the lowest since 1998), this week’s is domestic (979 kt). Both sides of the world are now structurally low at the same time — a double floor under price.
• But three counter-details must be read alongside it: (1) absolute inventory is still in the upper part of its six-year seasonal range — this is a slope story, not a level story; (2) billet has built two straight weeks with fees at cost, so the off-season signal at the processing end has not reversed; (3) narrowing spot discounts have come with thin turnover, meaning reluctance to sell outweighs restocking.
• Key tells: whether the next ingot print extends lower (toward ~950 kt), whether the billet build widens, and whether LME stocks keep grinding to records.

4 · Macro Factors

Data/latest

• Decision day (today’s biggest variable): the FOMC announces at 2:00pm ET on July 29 with a Warsh press conference at 2:30pm and no Summary of Economic Projections. The target range is currently 3.50%–3.75% (effective 3.63%), held for several consecutive meetings. CME FedWatch: hold ~66%, +25bp ~34%.
• The violence of this repricing is worth recording: hike odds went from 10.7% on July 15 to ~38% on July 24, then back to ~34% — one of the fastest repricings of a single meeting in recent memory — driven by Brent briefly above $100, a June dot plot with 9 of 18 officials projecting a 2026 hike, and Chair Warsh’s hawkish rhetoric on inflation.
• The disagreement is explicit: all 104 economists in the FactSet poll expect a hold; but Citadel Securities is reported to be positioned for a surprise hike — the tail is priced, not eliminated.
• The inflation tail cleared with oil: June CPI 3.5% YoY (below the 3.8% consensus) and a soft June PPI; Brent has now fallen four straight sessions to ~$87.53, softening the energy-inflation tail materially.

• Dollar index ~101.39 (−0.03%) ↓ — easing off a 15-month high, because softer energy prices limited the outlook for a Fed hike this year; +0.20% over the past month, +1.58% over 12 months. Marginally neutral-to-bullish for metals.
• Geopolitics (a standoff, not a détente): the lull in direct US–Iran hostilities continued on Tuesday July 28, but Iran said it has no negotiations with the United States at present. Oman has proposed a new mechanism for managing the Strait of Hormuz — modeled on the Strait of Malacca, letting users make voluntary contributions to fund navigation safety, environmental protection and search-and-rescue; the plan has regional backing, but Iran has not publicly accepted it. Iranian and Omani deputy foreign ministers held “useful negotiations” in Tehran on shipping traffic, with the compromise centering on Iran running transit with fewer restrictions on ships. Washington separately confirmed a fresh round of Israel–Lebanon talks.
• China: the late-July Politburo meeting is the domestic policy window, expected to set out H2 economic work, with the tone seen shifting from “use macro policy well” toward “focus on implementation, accelerate progress, prepare incremental policy.” Q2 GDP +4.3% YoY (Q1 5.0%, H1 +4.7%) — the weakest in nearly three years, with a “strong supply, weak demand” structural gap; June exports +27% YoY, manufacturing PMI 50.3; property investment ~−18%. LPR unchanged (1Y 3.00% / 5Y 3.50%).

View: impact on aluminum

• Bullish: China ingot inventory through 1 Mt at 979 kt; LME stocks the lowest since 1998 (271,275 mt) plus a mild backwardation; the dollar easing off a 15-month high; four down sessions in oil softening the inflation tail and forced-tightening risk; a prospective H2 global deficit (~930 kt); elevated ex-China premiums; the Politburo meeting as an incremental-policy window.
• Bearish: a live FOMC (~34% hike, with at least one major firm positioned for a surprise); $3,200 unbroken on three attempts and LME now back under MA5; alumina down to 2,686 with cost support still eroding; Indonesian and Chinese supply expansion has materially offset the Gulf outage; off-season demand plus a two-week billet build and fees at cost; Q2 GDP the weakest in three years with property at −18%.
• Net: floor-confirmed-cap-explained — the bulls now have inventory validation on both sides of the world, while the bears no longer depend on a macro narrative but hold a quantifiable supply offset (Indonesia plus China at full tilt). Tonight’s decision sets the near-term rhythm; the supply offset sets the medium-term ceiling.

5 · Fundamentals

Data: ex-China regional premiums remain elevated (tighter-supply expectations)

• Today’s most important fundamental update — “why the Gulf outage never lifted prices” now has an answer. Per Reuters columnist Andy Home (July 27): damaged Gulf smelters have stripped roughly 2 million tonnes from global supply, yet the LME 3M price has been broadly unchanged near $3,170 since February (after an earlier surge to $3,787.50). The offset comes from two places:
  • Indonesia: primary metal exports rose from 155 kt (2024) to 511 kt (2025) and grew another 58% YoY in January–May 2026; up to 11 new smelters are planned with combined capacity near 13 Mt/yr; the Hua Chin smelter (480 kt/yr) has ramped and Alamtri Resources Indonesia, of similar size, shipped first exports in June.
  • China: smelters are running at nearly 99% capacity utilization on healthy margins; semi-manufactured exports (bars, rods, tubes) rose 10% YoY in early 2026 and hit 595 kt in May, the highest monthly volume since November 2024.
• Other ex-China supply changes: EGA’s Al Taweelah alumina refinery has restarted after an outage of about three and a half months — marginal relief on the alumina side. Pre-war GCC exports accounted for ~9% of global aluminum consumption; continued Strait disruption still complicates the region’s raw-material imports and metal exports. Middle East gas shortages have lifted operating costs for power-hungry European and Asian smelters.
• Domestic supply: operating capacity ~45.31 Mt/yr (pressing the 45 Mt policy ceiling; installed ~46.1–46.3 Mt); output near capacity, the liquid-aluminum share ~77.2%. The market is seen shifting to a deficit through H2-26 (~930 kt global, Macquarie).
• Alumina: operating capacity ~96.2 Mt/yr, utilization ~78%; output growing ~8% (outpacing metal) → the surplus persists and weekly prices keep slipping on rising supply and ample stocks (AlCircle sees further weakness); AO2609 has fallen from 2,710 on July 20 to 2,686 on July 28; new Indonesian refinery projects plus the Al Taweelah restart are the main Q3 pressure. Downstream smelters show reduced willingness to restock at higher prices.
• Downstream: high-temperature off-season; leading processor operating rate ~61.3%; exports are the bright spot (June exports +27%, May semis 595 kt); PV/grid/auto steady; construction/property weak (property investment −18%); packaging steady; billet processing fees are at the cost line with a two-week build.
• Spot sentiment: broadly flat — discounts narrowing, holders reluctant sellers, downstream still buying dips, but with futures firming buyers went back to the sidelines and sellers barely shipped; Central China turnover mediocre on tax-invoice and next-month-invoice timing; South China subdued on rising arrivals and weak end-use.

View

• The core fundamental point today is that the hole has been filled: a 2 Mt Gulf loss has been broadly offset by new Indonesian exports plus Chinese full-capacity output and record semis exports. That is why $3,200 has failed three times — the ceiling is a supply constraint, not a macro one.
• Correspondingly, the quality of the China-side bull case now exceeds the ex-China one: China has a genuine destock (979 kt), while ex-China has low stocks but no incremental driver. The strong-inside/weak-outside ratio therefore has a basis to persist (interpretation).

6 · Primary Aluminum Spot Market

Data/latest (July 28 Changjiang/SMM caliber)

• Overall: holders broadly firmed offers and released metal slowly on dips, and spot discounts kept narrowing; downstream buyers still bought dips, but through the swings in futures buyers returned to the sidelines and sellers barely shipped, leaving overall turnover flat.
• East China: Changjiang spot A00 average 23,200 CNY/mt (range 23,180–23,220); Shanghai 23,190, Wuxi 23,190; the narrowing discount is the through-line, with spot-futures traders and rigid demand interlaced but no volume breakout.
• South China: Nanhai (Foshan) 23,260 CNY/mt, flat; rising arrivals and weak end-use, with tax-invoice circulation still a constraint; broadly wait-and-see.
• Central China (Henan): into the next-month-invoice rhythm, with holders only moderately willing to hold firm; current-month invoices traded more actively on tight availability; overall turnover “mediocre,” driven by rigid demand.

View

• Narrowing discounts plus flat turnover = supply-side reluctance, not demand-side restocking. That is the flip side of the same coin as the sub-1 Mt inventory print: metal really is scarcer, but downstream is not hungrier.
• If SHFE extends above 23,400 in the night session, spot turnover will most likely thin further and discounts could re-widen — the single most sensitive read on whether this leg is sustainable (interpretation).

7 · Key Price Drivers

Bullish

• China ingot inventory 979 kt on July 27, the cycle’s first break below 1 Mt; −27 kt vs the prior Thursday, −43 kt vs the prior Monday; ~486 kt of cumulative draw from the 1.465 Mt early-May peak.
• LME stocks 271,275 mt (July 24), the lowest in records back to January 1998 and less than one day of global consumption; on-warrant 245,350 mt; cash holds a ~$20/mt backwardation to 3M.
• SHFE rose on rising open interest (AL2609 +0.43% to 23,275, most-traded OI +4,000-plus lots), with a bullish moving-average alignment.
• The dollar has eased off a 15-month high to ~101.39; oil is down four straight sessions to ~$87.53, softening the inflation tail and forced-tightening risk.
• Structural shift toward an H2-26 deficit (~930 kt global); operating capacity ~45.31 Mt at the 45 Mt policy ceiling; secondary alloy in an 8th week of draws.
• Elevated ex-China regional premiums (Japan Q3 MJP ~$395, Europe ~$547.5, US Midwest ~110.5¢/lb); the Gulf’s ~9% share of global capacity with logistics still constrained; the Politburo meeting as an incremental-policy window.

Bearish

• A live July 29 FOMC (hike ~34%, hold ~66%) with the Warsh press conference the biggest near-term unknown and at least one major firm reported to be positioned for a surprise hike; September is the consensus hike.
• The supply offset is now quantified: Indonesian primary exports +58% YoY in Jan–May (511 kt in 2025, up to 11 new smelters and 13 Mt/yr planned, Hua Chin’s 480 kt ramped); China at ~99% utilization with May semis exports of 595 kt, the most since November 2024 — the 2 Mt Gulf hole has been broadly filled.
• LME closed back under MA5 for the first time ($3,148.60, −0.71%) and $3,200 is unbroken on three attempts; the ex-China board lacks a new marginal driver.
• Alumina still sliding (AO2609 ~2,686, −0.7%, down from 2,710 on July 20; SMM index ~2,720, four-market ~2,548) plus the EGA Al Taweelah restart and new Indonesian supply → cost support keeps eroding.
• Off-season demand: billet up two straight weeks to ~121 kt with fees at the cost line and July 14–20 withdrawals of 33 kt (−9.1 kt WoW, −19 kt YoY); processor operating rate ~61.3%; narrowing spot discounts on flat turnover; Q2 GDP +4.3%, the weakest in three years, with property investment −18%.

8 · One-Sentence Market View

9 · Watchlist for Today’s Day & Night Sessions

1. Tonight’s FOMC (2:00pm ET decision, Warsh presser 2:30pm, no SEP): whether FedWatch’s ~66% hold / ~34% hike is validated; a surprise hike or a hawkish presser would hit the dollar and metals first; note that with no dot plot, the press-conference language carries outsized weight.
2. SHFE AL2609 (Tuesday confirmed 23,275): whether the night session holds 23,300 and challenges 23,400/23,500; if the SMM snapshot of 23,445 is accurate, watch whether open interest keeps rising — a rising-OI advance is a real breakout, a falling-OI advance is a precursor to long liquidation.
3. LME 3M (Tuesday confirmed $3,148.60): whether it recovers MA20 (~$3,163); a loss of MA10 (~$3,140) opens $3,120 — the first close back under MA5 is the rebound’s first technical crack.
4. Dollar index (~101.39): whether the retreat from a 15-month high extends or reverses back above 101.5 after the decision — the key exogenous variable for the internal/external ratio.
5. China inventory & spot: whether the next SMM ingot print extends below 979 kt; whether narrowing spot discounts start coming with volume (discounts narrowing on persistently flat turnover is reluctance to sell, not demand); whether the billet build widens and processing fees hold the cost line.
6. LME stocks & structure: whether 271,275 mt (July 24) keeps setting records; how on-warrant 245,350 mt evolves; whether the ~$20/mt cash-to-3M backwardation widens — the only real-time verification of ex-China tightness.
7. The supply offset and geopolitics: the pace of Indonesian start-ups and exports (Hua Chin’s 480 kt, Alamtri’s ramp) and whether Chinese semis exports stay elevated; whether alumina’s AO2609 holds 2,650–2,700 (marginal supply after the EGA Al Taweelah restart); whether Iran accepts Oman’s Hormuz management mechanism and whether Brent holds the $85–88 band.