Weekend: The destock was real but supply-led, not demand-led. China's PMI at 49.2 and a fourth failed $3,200 test confirm it.周末版:去库属实,但驱动来自供应端而非需求;中国 PMI 49.2 与第四次冲击 3,200 美元失败印证这一点。

1 · Market Performance

Data SHFE aluminum, most-traded AL2609, Friday July 31 confirmed day-session close (SHFE official closing table)

• Open 23,650, high 23,760, low 23,620, close 23,630, settlement 23,665; change +45 on the settlement caliber (+0.19%); volume 139,957 lots; open interest 247,263.
• Both calibers shown: against the July 30 close of 23,625 the day’s move is just +5 (+0.02%); against the July 30 settlement of 23,620 it is +45 (+0.19%).
• The 23,760 intraday print is a new high for the entire rebound — and the close gave back 130 of it. A new high that produces a flat close is the textbook shape of rejection at the top of a range (interpretation).
• Volume contracted 33.2% (209,579 → 139,957 lots) and open interest fell for a second consecutive session (250,601 → 247,263, −3,338). The week’s positioning path: +4,000-plus (Jul 28) → +2,341 (Jul 29) → −3,175 (Jul 30) → −3,338 (Jul 31). Two sessions of rising price on rising open interest have become two sessions of stalling price on falling open interest. This was item 2 on the watchlist, and it has now answered bearish twice in a row (interpretation).
• Moving averages (vendor caliber, July 30, one session stale): MA5 23,587.56, MA10 23,462.56, MA20 23,346.68, MA40 23,297.85, MA60 23,371.70 — 23,630 remains above all five. (Note: SMM’s own July 30 qualitative read placed price above MA5/MA10/MA30 but below MA60, which contradicts this vendor set and appears to be a contract-caliber difference. Both are carried; neither is discarded.)
• Week’s path (SMM/exchange caliber): 23,195 (Jul 27) → 23,220 (Jul 28) → 23,455 (Jul 29) → 23,625 (Jul 30) → 23,630 (Jul 31), roughly +435 (+1.88%) across the week. But the entire gain landed on Wednesday and Thursday; Friday was flat.

Data LME 3-month aluminum, Friday July 31 confirmed close

• Confirmed close $3,194.65/mt, +0.02% (TradingEconomics caliber); an alternative vendor caliber prints $3,195 (+$2) — both agree it was effectively unchanged.
• Month +3.14%, year +24.14%; week roughly +$29.60 (+0.94%) from July 24’s $3,165.05.
• This is the fourth approach to the $3,200 hard cap in three weeks. LME traded as high as $3,211.50 intraday on July 30 but closed $3,193–3,194; July 31 closed $3,194.65 again. Four approaches, zero closes above. The evidence that $3,200 is a structural ceiling has strengthened, not weakened (interpretation).
• Moving averages (July 30 caliber): MA5 $3,178.34, MA10 $3,172.71, MA20 $3,182.56 — $3,194.65 is above all three. Support runs MA20 (~$3,183), MA5 (~$3,178), MA10 (~$3,173).

View Level assessment

• Both boards sit at the absolute high of the rebound, and both produced evidence of exhaustion on the same day. SHFE made a new high and gave it back; LME broke $3,200 intraday and could not close there. These are two expressions of one event.
• SHFE’s July range ceiling has moved from 23,500 to 23,700–23,760. Friday’s 23,760 is the tested high; 23,500 and MA5 (~23,588) form the first support band beneath.
• The two boards converged to flat on the very day China’s demand data deteriorated. The “China stronger than ex-China” tilt of earlier in the week was erased on Friday (SHFE +0.02% versus LME +0.02%) — the domestic relative strength did not extend (interpretation).
• Weekend note: SHFE and LME are closed. The Friday July 31 night-session print could not be confirmed and is not quoted here. The next pricing window is Monday, August 3.

2 · Prices & Related Markets

Data (SHFE, LME, China spot, alumina and alloy are all the confirmed July 31 caliber)

• SMM A00 / Shanghai spot ingot: 23,630 CNY/mt, unchanged (0) ↔ — on the day futures printed a new rebound high, the spot quote did not move. Thursday’s “spot leading futures” impulse did not extend.
• Regional spot (July 31, SMM): Foshan/Nanhai 23,740 (0) ↔; Wuxi 23,600 (−10) ↓; Hangzhou 23,650 (−10) ↓; Chongqing 23,630 (−30) ↓. Shanghai and Foshan flat, the other three lower, Chongqing weakest.
• Spot basis (this brief’s own computation): A00 23,630 against AL2609’s 23,630 close is par (0); against the 23,665 settlement it is a 35-yuan discount. (Labeled interpretation; not SMM’s official front-month basis.) Par has now held two sessions, but the mechanism changed from “spot chasing higher” to “both sides frozen” — that is a materially weaker form of the same reading (interpretation).
• Foshan-over-Shanghai spread: 110 yuan (23,740 − 23,630), narrowing 5 from 115 on July 30. SMM stated explicitly on July 31 that the 50-yuan weekly widening to 115 was driven by a sharp drop in arrivals, not by stronger demand (confirmed) — which directly overturns reading Foshan’s premium as South China demand strength.
• LME aluminum: $3,194.65 (+0.02%) confirmed ↔ (alternative caliber $3,195, +$2).
• LME stocks: 271,275 mt (July 24), the lowest since records began in January 1998 ↓; on-warrant 245,350 mt — no update for a sixth consecutive trading day; the marginal information content keeps decaying.
• SHFE aluminum warehouse stocks (July 27–31 weekly report, NEW): 448,742 mt, −6,350 w/w ↓ — by region: Jiangsu −11,261 (199,944 → 188,683), Guangdong −5,297 (52,172 → 46,875), Shandong −1,485, Shanghai −1,051, Zhejiang unchanged at 24,475, Henan +14,010 (117,581 → 131,591). Henan was the sole builder, and its single-week build was more than double the national net draw.
• China social ingot inventory: 953 kt (July 30, SMM weekly) ↓ — no new print today.
• Billet inventory: 119.5 kt (July 30) ↓ — no new print today.
• ADC12 (secondary alloy, July 31): national average 24,200 CNY/mt (range 24,100–24,300), unchanged ↔; East, South, Southwest and Northeast China all 24,200, all flat. Other alloys: A380 26,100, AlSi9Cu3 25,100, A356 24,100, A360 24,250, ZLD102 23,750, ZLD104 23,850 — all unchanged ↔. Japanese import ADC12 $3,040–3,100 and general CIF $3,040–3,160, midpoints unchanged ↔. After two consecutive sessions of broad gains, the entire secondary complex went to zero change on month-end day (interpretation).
• Alumina (July 31, SHFE official closing table): AO2609 open 2,648, high 2,652, low 2,618, close 2,621, settlement 2,635, change −27; volume 185,860 lots (versus 381,349 prior, −51.3%); open interest 242,811 (from 248,892) ↓↓. The 2,618 low is a new low for the move. Deferred months fell in lockstep: 2610 close 2,629 (−25), 2611 2,653 (−22), 2612 2,668 (−29), 2701 2,694 (−24) — the whole curve shifted lower.
• Alumina spot (July 31, SMM): SMM alumina index 2,706.65 (−0.71) ↓; Guizhou 2,775, Henan 2,750, Shanxi 2,740, Shandong 2,725, Guangxi 2,635 — every regional spot quote unchanged. Futures down, spot frozen: the futures-spot gap keeps widening (interpretation).
• SHFE alumina warehouse stocks (July 27–31 weekly): 372,008 mt, +4,289 w/w ↑ — Xinjiang +5,096, Guangxi +3,308, Shandong −1,800. The exact opposite direction to aluminum warrants.
• Crude (July 31): Brent settled +1.2% near $88; WTI +1% to settle below $85. Brent gained roughly 24% across July, its strongest month since March. ↑
• Dollar index: settled 99.83 on July 31, little changed on the day; −1.3% for July, its worst month since April; roughly −1.5% on the week; still +1.6% year to date. ↓

View

• The core of Friday’s price information is a broad stall. Spot flat, ADC12 flat across every region, alumina spot flat across every region, LME +0.02%, SHFE +0.02% — on the same day futures printed a new rebound high, virtually every physical caliber stopped following.
• Thursday’s “spot leading futures” evidence did not extend. July 30: A00 +230 against futures +170. July 31: A00 flat while three of five regions eased. The basis is still par, but its cause degraded from active spot convergence to bilateral paralysis — a lower grade of evidence (interpretation).
• Alumina’s decline has moved from a breakdown to a trend. AO2609 fell and shed open interest for a third straight session (−34,885 on Jul 29, −6,152 on Jul 30, −6,081 on Jul 31), the whole forward curve shifted lower, and spot did not move at all — futures are pricing a spot decline that has not yet happened.

3 · Inventory

Data — the single most important item today: SMM’s July 31 analysis reattributes the destock

• Weekly aluminum-ingot warehouse withdrawals fell to 127,700 mt. Withdrawals had run near 170,000 mt in June, a four-year high for the season; that seasonal-high advantage has now been surrendered.
• SMM states explicitly that the real driver of this week’s accelerated destock was the supply side — a slower shipment pace. July’s liquid-aluminum ratio rose to 78.3% and cast-ingot volume fell 15.1% YoY.
• Foshan’s premium widened 50 yuan w/w to 115 yuan/mt, which SMM attributes to a sharp drop in arrivals, not stronger demand.
• July China primary output rose 1.6% YoY and 3.5% MoM; SMM expects the liquid-aluminum ratio to edge higher again in August.
• Leading downstream processors’ operating rate is 60.2%, down 0.9 points (from roughly 61.3%).

View — this is a substantive correction to yesterday’s read

• Yesterday this brief read the ingot draw plus the first billet draw as evidence metal was reaching end-use, and called it the highest-quality bullish item of the rebound. SMM’s own July 31 analysis gives the opposite causation: inventory fell not because more metal was consumed, but because less metal was cast into ingot.
• The arithmetic is direct: a 78.3% liquid ratio means nearly eight-tenths of primary output goes out as molten metal into casting/billet lines and never enters the ingot statistic; cast-ingot volume −15.1% YoY means the inflow itself is shrinking. With withdrawals ALSO falling, inventory still declines — numerator and denominator contracting together, not demand expanding.
• The same logic explains Foshan: local tightness caused by fewer arrivals shows up as both a wider premium and lower inventory, but it carries no demand information. This brief flagged Foshan’s excess gain as a pending test for two sessions. The verdict: supply-side noise, not a demand signal.
• None of this negates the destock itself, but it demotes it from “demand confirmation” to “a structural change on the supply side.” The price implication: destocking can continue — SMM expects it to persist into August — but it can no longer be used as evidence that downstream demand is improving.

Data — inventory levels across calibers

• China ingot: 953 kt (July 30), −53 kt versus 1,006 kt on July 23 (Thursday-to-Thursday) and −26 kt versus July 27; −512 kt (−35%) from the early-May peak of 1.465 Mt. No new print today.
• Billet: 119.5 kt (July 30), −0.25 kt versus July 27. No new print today.
• SHFE aluminum stocks (July 27–31 weekly, NEW): 448,742 mt, −6,350 w/w. Jiangsu −11,261, Guangdong −5,297, Shandong −1,485, Shanghai −1,051, Zhejiang 0, Henan +14,010.
• SHFE alumina stocks (NEW): 372,008 mt, +4,289 w/w (Xinjiang +5,096, Guangxi +3,308, Shandong −1,800).
• Bonded-zone inventory (July 30): Shanghai 83.4 kt, Guangdong 30.0 kt, total 113.4 kt, +20 kt w/w ↑ — a contrary reading: social inventory drew while bonded stocks built.
• National alumina inventory: 7.028 Mt (July 30), +24 kt w/w.
• LME stocks: 271,275 mt (July 24) — lowest since January 1998; on-warrant 245,350 mt; no update.

View

• The aggregate inventory evidence is still bullish; the structural evidence has turned. Ingot 953 kt, SHFE warrants −6,350, LME 271 kt — all pointing the same way in level terms. But withdrawals falling, cast-ingot −15.1% YoY, bonded stocks +20 kt and Henan +14,010 mt are four independent structural readings all saying flows are contracting rather than consumption expanding.
• Henan’s +14,010 mt deserves its own line: in a week when national SHFE stocks fell a net 6,350 mt, one province added 14,010 mt — regional transfer is substituting for genuine absorption (interpretation).
• Bonded +20 kt against social −26 kt weakens the “China is absolutely tight” narrative: some metal simply moved from social to bonded warehouses without leaving the system.

4 · Macro Factors

Data — China: July manufacturing PMI back into contraction

• July official manufacturing PMI printed 49.2, down 1.1 points from June’s 50.3, a five-month low, and below the 50.0 median in a Reuters poll.
• The new-orders sub-index collapsed to 48.5 from 51.2; the employment sub-index rose 0.5 points to 49.0.
• The NBS attributes the drop to a high base from the prior period’s rapid manufacturing growth plus the traditional off-season in some manufacturing industries.
• View This is the week’s most important domestic macro reading for aluminum, because it points to the same conclusion as the inventory analysis. New orders went straight from expansion (51.2) to contraction (48.5), a 2.7-point drop — that is a demand-side collapse, not a production-side one. Together with withdrawals falling to 127.7 kt and a leading-processor operating rate of 60.2% (−0.9 pt), it forms three independently sourced demand readings pointing the same way, which makes the bullish interpretation of Thursday’s inventory print hard to sustain (interpretation).
• The offset to keep in view: the July 30 Politburo meeting already set policy at “more proactive fiscal policy plus moderately loose monetary policy,” “stronger counter-cyclical adjustment,” “expanded domestic demand” and “timely rollout of practical incremental policies.” A weaker PMI raises the probability and size of those incremental measures — a bad-news-is-good-news channel, but one that arrives with a lag.

Data — dollar: a heavy month, but a hawkish Friday

• The dollar index settled 99.83 on July 31, little changed on the day; −1.3% for July, its worst month since April; roughly −1.5% on the week; still +1.6% YTD.
• The Bank of Japan held its policy rate at 1.0% in an 8–1 vote, with Hajime Takata dissenting for a 25bp hike; the BOJ trimmed its core inflation outlook and nudged up its GDP forecast.
• Suspected intervention entered a second day: USD/JPY fell 0.8% to 158.23 from a 159.50 open; the yen gained more than 3% on the week to a two-month high after recently hitting a 40-month low. Tokyo still has not confirmed any operation; Washington has suggested Japan employed measures to lift the yen.
• View A meaningful share of the dollar’s July decline came from exogenous moves in one index component rather than from any change in US rate expectations. This brief maintains its prior read: this is a low-information-quality dollar tailwind for aluminum.

Data — July 31 US data: stronger than expected across the board

• Q2 employment cost index +0.9% QoQ versus +0.8% expected; wages and salaries +0.9%, benefit costs +1.0%.
• July Chicago PMI rose to 57.6 from 56.7, well above the 55.0 consensus.
• University of Michigan final July sentiment 55.2 versus 54.0 expected; current conditions 54.8, expectations 55.4; 1-year inflation expectations 4.2%, 5-year 3.3%.
• View This is an “accelerating wage costs plus improving factory activity plus elevated inflation expectations” set, and its direction is unambiguously hawkish. It conflicts with Thursday’s dovish Q2 GDP advance print of 1.5%, and Friday’s set carries higher policy relevance — the ECI is among the Fed’s closest-watched wage-inflation gauges. It explains why the dollar did not keep sliding after a heavy month: the rate-expectations leg never loosened.

Data/continuing — Fed path

• The July 29 FOMC held at 3.50–3.75% in a 9–3 vote, with Hammack, Kashkari and Logan all dissenting for a 25bp hike.
• September 16 pricing: the latest snapshot obtainable for this brief remains the July 30 caliber — hike ≥25bp roughly 79.5%–81%, hold roughly 19%–20.5%, cut 0%; an alternative vendor caliber prints hold 29.8%, cumulative +25bp 50.6%, cumulative +50bp 19.6% (hike total roughly 70.2%). A confirmed post-July-31 snapshot has not been obtained and no new figure is invented here; but the day’s data ran hawkish, which does not support hike odds falling at the margin (interpretation).

Data — geopolitics and energy

• Brent settled +1.2% near $88 on Friday and WTI +1% below $85; Brent gained roughly 24% across July, its strongest month since March.
• Trump said the US would reinstate the blockade of commercial vessels out of the Strait of Hormuz in response to the exchange of strikes with Iran, which dents the prospect of Gulf supply returning.
• On the other side, tanker traffic through Hormuz picked up after the earlier slowdown, letting millions of barrels through; regional mediators have put a 10-day ceasefire proposal to Washington and Tehran.
• View The geopolitical input turned two-sided this week for the first time: a blockade threat (bullish) alongside recovering transits and a ceasefire proposal (bearish). In aluminum’s pricing, geopolitics has functioned as support for the ceiling rather than as the driver through it — four approaches to $3,200 without a break already says the marginal utility of the war premium is falling (interpretation).

View — impact on aluminum

• Bullish: the dollar lost 1.3% in July and settled 99.83; Brent’s ~24% July lifts overseas smelting and freight costs; Trump’s threat to reinstate the Hormuz blockade pushes the return of ~2 Mt of Gulf supply further out; LME stocks at 271,275 mt remain the lowest since 1998; SHFE aluminum warrants drew 6,350 mt on the week; the Politburo’s “expand domestic demand” framing plus a weak PMI raises the odds of incremental policy.
• Bearish: China’s July manufacturing PMI at 49.2 with new orders 48.5 — the demand side deteriorated directly; Friday’s US data ran hawkish across the board (ECI +0.9%, Chicago PMI 57.6, UMich 55.2, 1-year inflation expectations 4.2%) and the September hike threat is not lifted; SMM attributes the destock to the supply side (withdrawals 127.7 kt, cast ingot −15.1% YoY), not demand; alumina fell and shed open interest a third straight session while SHFE alumina warrants built 4,289 mt; bonded stocks rose 20 kt; recovering Hormuz transits and a 10-day ceasefire proposal dilute the war premium; SHFE stalled on falling open interest two sessions running.
• Net: the macro and industry information turned in the same direction on Friday — domestic demand data, the causal explanation of the domestic destock, and positioning behaviour on the board all moved bearish at once, while the bullish items are concentrated in two stock-and-cost legs that are levels, not changes.

5 · Fundamentals

Data/continuing — overseas regional premiums

• Overseas spot (SMM weekly review, July 31, NEW): the overseas primary aluminum spot market weakened across the board this week; off-season trading is thin and regional premiums across Asia and the US have been declining. View This is the same phenomenon as China’s flat spot session, expressed in a second geography, and it weakens the “overseas tightness spilling over” narrative.
• Overseas supply: damage to Gulf smelters has cost the world roughly 2 Mt of supply (pre-war Gulf exports were about 9% of global aluminum consumption); Trump’s threat to reinstate the Hormuz commercial-vessel blockade pushes the return timetable further out; Middle East gas shortages keep raising Eurasian smelter operating costs; Brent’s ~24% July feeds straight into overseas smelting and freight costs.
• The supply offset (uninterrupted, and still the structural explanation for the ceiling): Indonesian primary exports went from 155 kt in 2024 to 511 kt in 2025 and ran +58% YoY in Jan–May 2026; as many as 11 new smelters totalling ~13 Mt/yr are planned; Huaxin’s 480 kt/yr has ramped; Kaltara targets phase-one 500 kt/yr by October 2026; Vietnam’s Dak Nong phase one (150 kt/yr) started in Q2 2026. Guinea, the world’s largest bauxite producer, is advancing export controls while planning five alumina refineries totalling ~7.2 Mt/yr.
• Domestic supply (SMM, NEW on July 31): July China primary output +1.6% YoY and +3.5% MoM; the liquid-aluminum ratio reached 78.3%, a bigger increase than expected, with SMM expecting a further modest rise in August; cast-ingot volume −15.1% YoY. Operating capacity is about 45.31 Mt/yr (against the 45 Mt policy ceiling) at close to 99% utilization. Output rising while ingot casting falls is precisely the industrial explanation for social inventory drawing at the same time bonded stocks build (interpretation).
• Alumina: running capacity ~96.2 Mt/yr at ~78% utilization, output growing ~8% — faster than metal, so the surplus persists and is deepening; July 31: AO2609 closed 2,621 (−27) with a 2,618 low, a new low for the move, and a third straight session of position reduction; SHFE alumina warrants built 4,289 mt on the week; national alumina inventory is 7.028 Mt (+24 kt w/w) with Guangxi’s new capacity ramping this week. On bauxite, Guinea’s export controls remain the medium-term variable and Indonesia faces its own bauxite gap risk.
• Downstream demand: leading processors’ operating rate 60.2%, −0.9 pt; July manufacturing PMI 49.2 with new orders 48.5; photovoltaics is the one clear bright spot — SMM reports PV frame makers holding operating rates steady, with China module output projected to rise from 38.5 GW in July to 39.3 GW in August ↑; grid and autos steady; construction/property weak (property investment ~−18%); packaging stable; exports still a support (June exports +27%, May semis 595 kt).
• Spot sentiment (July 31): weak. SMM’s South China review: “oversupply persists, overall trading is lackluster”; traders held prices at month-end then accelerated selling to cash out of high prices; downstream buyers were fearful of high prices with minimal purchasing appetite.

View

• The net fundamental change this week is that a supply-side structural shift was confirmed and demand weakness was confirmed — and the two happen to explain each other. A 78.3% liquid ratio plus cast ingot −15.1% explains why inventory fell; new orders at 48.5 plus a 60.2% operating rate plus withdrawals at 127.7 kt explains why the falling inventory produced no spot premium.
• PV is the one counter-trend item, and it is not trivial: module output rising 38.5 → 39.3 GW implies steady frame-aluminum demand. But it cannot offset construction and general manufacturing on its own.
• The cost floor keeps moving down of its own accord: alumina lower three sessions running, warrants building, Guangxi ramping. Aluminum flat while alumina falls means smelter margins keep expanding passively — under the 45 Mt ceiling that will not convert into new domestic output immediately, but it continually strengthens the incentive to commission capacity offshore.

6 · Primary Aluminum Spot Market

Data (July 31, SMM caliber)

• Overall: spot stopped following entirely, shifting from “chasing higher” to zero change and small pullbacks. Shanghai and Foshan flat; Wuxi and Hangzhou −10; Chongqing −30. On a day futures printed a new rebound high of 23,760, spot offered no follow-through at all.
• East China: Shanghai 23,630 (0), Wuxi 23,600 (−10), Hangzhou 23,650 (−10). The basis holds par against the close and a 35-yuan discount against the settlement (own computation). Par is being sustained by futures stalling rather than spot strengthening — the test this brief set (can par hold or turn to a premium without futures falling back) has not yet produced a valid sample: on July 31 futures indeed did not fall back, but spot did not strengthen either, so the evidence is neutral-to-weak (interpretation).
• South China: Nanhai/Foshan 23,740 (0), still the highest absolute level nationally; the spread over Shanghai is 110 yuan versus 115 the prior session. SMM’s mainstream quotes ran at a 30-to-10-yuan discount to the board, while actual transactions concentrated at premiums of 85 to 125 yuan over the 2608 contract. Market description: traders held prices at month-end, then accelerated selling under pressure to cash out of high prices; downstream buyers were fearful of high prices with minimal appetite; trading firms pressed for lower prices with little flexibility beyond committed orders; “oversupply persists, overall trading is lackluster.”
• Southwest / other: Chongqing 23,630 (−30), the largest single-day fall nationally.
• Secondary alloy: ADC12 national average 24,200 (0) with East, South, Southwest and Northeast China all flat; A380 26,100, AlSi9Cu3 25,100, A356 24,100, A360 24,250, ZLD102 23,750, ZLD104 23,850, all unchanged; Japanese import $3,040–3,100 and general CIF $3,040–3,160, midpoints unchanged. Two sessions of broad gains, then a third session at zero.

View — shipment and purchasing sentiment

• Shipment willingness: strong, and it turned urgent intraday. Holding prices at month-end and then “accelerating sales to cash out” is a direct expression of sellers’ lack of confidence in the durability of these levels.
• Purchasing sentiment: weak. “Fearful of high prices,” “nothing beyond rigid demand,” “pressing for lower prices with limited flexibility” — three descriptions of one state: buyers are waiting for a pullback, not worried about securing units.
• Foshan’s high price and wide premium are supported by insufficient arrivals, not by demand (SMM explicit). That means the Foshan premium can converge on its own once arrivals normalize — it does not require a price fall to unwind.

7 · Key Price Drivers

Bullish

• Overseas stocks still at a historic floor: LME inventory 271,275 mt (July 24), lowest since January 1998, on-warrant 245,350 mt, under one day of global consumption, with Russian metal the bulk of the remainder.
• SHFE stocks drew on the week: 448,742 mt in the July 27–31 report, −6,350 w/w, led by Jiangsu −11,261 and Guangdong −5,297.
• China social inventory is still falling in level terms: 953 kt (July 30), −512 kt (−35%) from the May peak; SMM expects destocking to persist into August.
• Cost and geopolitics: Brent’s ~24% July, its strongest month since March, lifts overseas smelting and freight costs; Trump’s threat to reinstate the Hormuz commercial-vessel blockade pushes the ~2 Mt Gulf return further out.
• A weaker dollar month plus policy expectations: DXY settled 99.83, −1.3% in July, worst since April; the Politburo has set “stronger counter-cyclical adjustment” and “expanded domestic demand,” and a weaker PMI itself raises the probability and scale of incremental policy.

Bearish

• The demand side deteriorated directly — this week’s most important new bearish item: China’s July official manufacturing PMI printed 49.2, down 1.1 points from 50.3, a five-month low back in contraction and below the 50.0 consensus; new orders collapsed to 48.5 from 51.2.
• SMM itself overturned the destock’s causation: weekly withdrawals fell to 127,700 mt (against a near-170,000 mt four-year seasonal high in June); July’s liquid-aluminum ratio is 78.3% and cast-ingot volume is −15.1% YoY; SMM explicitly attributes the accelerated draw to a slower supply-side shipment pace. Foshan’s wider premium is likewise attributed to a collapse in arrivals rather than demand.
• Friday’s US data ran hawkish across the board: Q2 ECI +0.9% (versus +0.8% expected), Chicago PMI 57.6 (versus 55.0), UMich final 55.2 (versus 54.0), 1-year inflation expectations 4.2%. The September hike threat is unlifted (obtainable snapshots ~70%–81%), and the dollar’s July decline lacks a rate-side foundation.
• Positioning has declined to confirm for two straight sessions: SHFE open interest −3,175 on July 30 and −3,338 on July 31 to 247,263; July 31 volume −33.2% to 139,957 lots; a new high at 23,760 gave back 130 to close 23,630.
• The cost floor keeps collapsing: AO2609 fell a third straight session to 2,621 with a new 2,618 low and a third straight session of position reduction; SHFE alumina warrants +4,289 w/w; national alumina inventory 7.028 Mt with Guangxi ramping.
• Spot and secondary alloy stalled completely: A00 flat, Wuxi/Hangzhou −10, Chongqing −30; ADC12 and every alloy grade at zero change; overseas regional premiums broadly lower this week; SMM’s South China desk calls trading lackluster.
• Structural readings point to transfer rather than absorption: bonded inventory +20 kt to 113.4 kt; SHFE Henan +14,010 mt in a week the national total fell only 6,350 mt; the Indonesian and Chinese supply offset has not paused (Indonesian exports +58% Jan–May, China at ~99% utilization, July output +1.6% YoY / +3.5% MoM).

8 · One-Sentence Market View

9 · Watchlist for the Week Ahead (Monday August 3 Reopen & Night Sessions)

1. Whether a fifth test of $3,200 even happens (the week’s main event): four approaches, zero closes above, and the fourth came in the same week China’s demand data turned. If LME cannot get back near $3,200 quickly after Monday’s reopen, the rebound high was probably set at $3,211.50 on July 30; support beneath is MA20 (~$3,183), MA5 (~$3,178), MA10 (~$3,173).
2. Whether SHFE open interest stops falling (the key falsification test, which has answered no twice): −3,175 on July 30 and −3,338 on July 31, a two-day total of −6,513 to 247,263. If Monday brings further position reduction around 23,630, the advance is confirmed as short covering and 23,760 is the high of the move; only a return to rising price on rising open interest would overturn that. Support 23,500 and MA5 (~23,588); resistance 23,760.
3. Monday August 3’s SMM weekly ingot inventory AND withdrawal figure (the core of this list): it is not enough to watch whether 953 kt falls further — watch whether withdrawals recover from 127.7 kt. Inventory down with withdrawals down again would reconfirm the supply-driven characterization and further discount the destock’s price support; withdrawals recovering would be genuine demand improvement.
4. A quality test on the basis and the Foshan spread: par has held two sessions, but by bilateral paralysis. Monday’s questions: can A00 strengthen into a premium without futures falling back, and does Foshan’s 110-yuan spread over Shanghai converge as arrivals normalize (SMM has already identified arrivals as its cause)? If Foshan converges while the East China basis simultaneously weakens, the last piece of evidence for domestic spot tightness is removed.
5. Whether alumina stops falling: AO2609 has fallen and shed open interest three sessions running to 2,621 with a new 2,618 low, the whole curve lower, while spot has not moved at all. Watch for a reclaim of 2,650, whether spot starts converging down to futures, and the actual pace of Guangxi’s ramp-up. Alumina falling further while aluminum trades flat means smelter margins keep expanding, which keeps strengthening the incentive to commission offshore capacity.
6. The dollar and September rate pricing: 99.83 on July 31 and −1.3% for July, but that same day’s ECI +0.9%, Chicago PMI 57.6, UMich 55.2 and 4.2% one-year inflation expectations all ran hawkish. Watch next week’s US employment and ISM data — the key test — and whether CME FedWatch September hike odds move up from the ~70%–81% range; also whether Tokyo formally confirms intervention. If the divergence between the dollar and rate expectations converges, the likelier direction is still a dollar rebound.
7. Geopolitics is now two-sided: on one side Trump’s threat to reinstate the Hormuz commercial-vessel blockade (bullish), on the other recovering tanker transits and the 10-day ceasefire proposal from regional mediators (bearish). Watch whether either side accepts the proposal, and whether Brent can hold the $88 line after a ~24% July.
8. Domestic policy and data follow-through: after a 49.2 PMI, watch whether the “timely rollout of practical incremental policies” accelerates, and whether August exports, the Caixin PMI and property data validate the “expand domestic demand” framing.