Weekend: China's aluminium processing PMI falls to 42.2 with all seven subsectors contracting. Ex-China output turns higher.周末版:中国铝加工 PMI 降至 42.2%,七大子行业全部收缩;海外产量转增。

1 · Market Performance

Data — this brief contains no new price print

• Saturday August 1 and Sunday August 2 are non-trading days on SHFE and LME, and SMM publishes no spot quotes. There is no new price print of any kind in this brief. The next pricing window is Monday, August 3.
• SHFE most-traded AL2609’s latest confirmed close remains the July 31 day session: open 23,650, high 23,760, low 23,620, close 23,630, settlement 23,665; change +45 on the settlement caliber (+0.19%) or +5 on the close caliber (+0.02%); volume 139,957 lots; open interest 247,263.
• LME 3M’s latest confirmed close remains July 31: $3,194.65 (+0.02%); month +3.14%, year +24.14%. Alternative vendor caliber $3,195 (+$2).

Newly confirmed — the July 30 night session, and an attribution correction

• The SHFE aluminum night session of the evening of July 30: open 23,650, high 23,725, low 23,630, close 23,720, +0.40%.
• This must be stated plainly: that is the July 30 night session, NOT the Friday July 31 night session. This brief said on August 1 that the Friday night print could not be confirmed and would not be quoted; on review that handling was correct. The July 31 night session still has no verifiable source and remains unquoted here (interpretation).
• The print carries one piece of substantive information: the 23,720 night close gapped down 70 to the July 31 day-session open of 23,650, and the July 31 day high of 23,760 exceeded the night session’s 23,725 by only 35. In other words the true high zone of this rebound was established in the July 30 night session; Friday’s “new high” was a second touch of the same zone, not an extension of it (interpretation).
• Full LME July 30 caliber (new): open $3,181, high $3,211.50, low $3,171.50, close $3,193, +0.52%.

Newly confirmed — weekly and arbitrage calibers

• Week-on-week against the July 24 close: +1.74%. (The +1.88% this brief carried earlier is the July 27–31 intra-week range caliber. Different bases; both shown.)
• A separate vendor caliber reports a “weekly settlement of 23,388, +2.09% on the week.” That figure cannot be reconciled with the daily settlement series and appears to be a weekly-average caliber. Flagged, not adopted.
• The SHFE/LME price ratio recovered to 7.4 from a low of 6.5, +13.8%, narrowing the import loss to roughly 3,300 yuan/mt. View The ratio repair confirms that China’s relative strength in July was real, but the import window remains deeply shut — a 3,300-yuan loss will not pull metal in, so ex-China supply has no marginal effect on the domestic balance.

Carried forward — moving averages (July 30 vendor caliber, now two sessions stale)

• SHFE: MA5 23,587.56, MA10 23,462.56, MA20 23,346.68, MA40 23,297.85, MA60 23,371.70 — 23,630 is above all five.
• LME: MA5 $3,178.34, MA10 $3,172.71, MA20 $3,182.56 — $3,194.65 is above all three.
• (Note: SMM’s own July 30 qualitative read placed price above MA5/MA10/MA30 but below MA60, contradicting this vendor set, apparently a contract-caliber difference. Both are carried. This set is now two sessions stale and its information value keeps decaying.)

View Level assessment

• Both boards remain at the absolute high of the rebound, but the upside has failed to extend across two consecutive sessions since the July 30 night print. The effective SHFE resistance band should be narrowed to 23,725 (July 30 night high) – 23,760 (July 31 day high), a 35-yuan window; LME to $3,200 (hard cap) – $3,211.50 (July 30 intraday high).
• Support is unchanged: SHFE 23,500 and MA5 (~23,588); LME MA20 (~$3,183), MA5 (~$3,178), MA10 (~$3,173).
• Neither weekend development changes the level structure, but together they sharply change the variance of Monday’s open. The demand item (processing PMI 42.2) is a certain, already-realized negative. The geopolitical item (preparations to strike Iran’s energy infrastructure) is an unauthorized, possibly non-occurring positive tail. The first lowers the center of gravity; the second widens the distribution. They operate on different clocks and should not be netted against each other (interpretation).

2 · Prices & Related Markets

Data — all July 31 caliber; no weekend update

• SMM A00 / Shanghai spot ingot: 23,630 CNY/mt, unchanged (0) ↔
• Regional spot: Foshan/Nanhai 23,740 (0) ↔; Wuxi 23,600 (−10) ↓; Hangzhou 23,650 (−10) ↓; Chongqing 23,630 (−30) ↓.
• 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.)
• Foshan-over-Shanghai spread: 110 yuan. SMM has stated explicitly that the widening was driven by a sharp drop in arrivals, not stronger demand.
• LME aluminum: $3,194.65 (+0.02%) ↔ (alternative caliber $3,195, +$2).
• LME stocks: 271,275 mt (July 24), lowest since records began in January 1998 ↓; on-warrant 245,350 mt. New context: the prior record low was 271,450 mt in August 2022; stocks have fallen from about 420,000 mt in January. No update for an eighth consecutive trading day; the marginal information content is now close to zero (interpretation).
• SHFE aluminum warehouse stocks: 448,742 mt (July 27–31 weekly), −6,350 w/w ↓; Henan +14,010 was the sole builder.
• China social ingot inventory: 953 kt (July 30) ↓; billet 119.5 kt (July 30) ↓. No weekend print.
• ADC12 (July 31): national average 24,200 CNY/mt, unchanged ↔; East, South, Southwest and Northeast China all 24,200. A380 26,100, AlSi9Cu3 25,100, A356 24,100, A360 24,250, ZLD102 23,750, ZLD104 23,850 — all unchanged ↔.
• Alumina futures: AO2609 close 2,621 (−27), low 2,618 a new low for the move; open interest 242,811 (−6,081), a third straight session of position reduction ↓.
• Alumina spot: 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 quote unchanged.
• SHFE alumina warehouse stocks: 372,008 mt, +4,289 w/w ↑.
• Crude: Brent settled +1.2% near $88 on July 31, with July about +24%, its strongest month since March ↑; WTI +1% to settle below $85. No weekend settlement.
• Dollar index: 99.83 on July 31 (settle caliber); 99.78 on the TradingEconomics caliber, −0.08% on the day; −1.3% for July, worst month since April; +1.6% year to date ↓.

View

• The absence of weekend price information is itself the most important fact in this section. July 31’s broad stall — spot flat, ADC12 flat everywhere, alumina spot flat everywhere, both boards +0.02% — carries into the August 3 open uncorrected.
• The only new price-adjacent information is the 7.4 ratio and the ~3,300-yuan import loss. The combination reads neutral: the ratio repair rules out China materially underperforming ex-China, but a 3,300-yuan loss means foreign metal still cannot enter, so the domestic balance stays governed by domestic variables alone.
• Alumina’s futures-spot divergence crosses the weekend intact: three straight down sessions, a 2,618 low, and spot that has not moved at all. At Monday’s open that divergence resolves either by spot catching down or by futures rebounding — the cleanest binary of the week (interpretation).

3 · Inventory

Data — no new inventory print over the weekend

• China ingot: 953 kt (July 30 SMM weekly), −53 kt versus July 23, and −512 kt (−35%) from the early-May high of 1,465 kt.
• Weekly warehouse withdrawals: 127,700 mt (June ran near 170,000 mt, a four-year seasonal high).
• Billet: 119.5 kt (July 30).
• SHFE aluminum: 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: 372,008 mt, +4,289 w/w (Xinjiang +5,096, Guangxi +3,308, Shandong −1,800).
• Bonded zones (July 30): Shanghai 83.4 kt, Guangdong 30.0 kt, total 113.4 kt, +20 kt w/w ↑.
• National alumina inventory: 7.028 Mt (July 30), +24 kt w/w ↑.
• LME: 271,275 mt (July 24), on-warrant 245,350 mt. Eighth consecutive session without an update.

View — what processing PMI 42.2 finally does to the inventory narrative

• On July 31 this brief downgraded the destock from “demand confirmation” to “supply-side structural change.” The August 2 processing PMI at 42.2 completes that downgrade: it does not merely say demand failed to improve, it says demand is deteriorating at 4.4 points a month.
• The arithmetic chain now closes completely: liquid-aluminium ratio 78.3% (+1.1 pt m/m) → cast-ingot volume −15.1% y/y and −1.4% m/m → the inflow into ingot inventory contracts; processing PMI 42.2 with all seven segments in contraction → the outflow contracts in step (127,700 mt). Both ends shrinking while stocks fall net is a low-throughput balance, not a high-consumption destock.
• The price implication of a low-throughput balance is the opposite of a consumption destock: the former can reverse quickly the moment the supply side resumes casting — if the liquid ratio peaks, or if narrowing processing margins push billet capacity back toward ingot. Only the latter is self-reinforcing and bullish. SMM forecasts the August liquid ratio at just 78.5%, +0.2 points, sharply decelerating from July’s +1.1 — which signals the cast-ingot contraction is near its limit (interpretation).
• The two structural reads are unchanged and still point to relocation rather than absorption: bonded zones +20 kt w/w, and Henan alone building 14,010 mt in a week against a 6,350 mt national net draw.

4 · Macro

Data — weekend geopolitics, the single largest new variable in this brief

• On August 1, CBS News reported, sourced to a Friday cabinet meeting at Camp David, that the US and Israel are preparing large-scale strikes on Iran’s energy infrastructure. Targets would likely include power plants and refineries; Kharg Island — which handles the vast majority of Iranian crude exports — is described as the highest-consequence potential target. Action was described as possible over the weekend, within 48 hours.
• Critical qualifier: as of that reporting, Trump had not given the final order. Israel has been informed and is coordinating with the US.
• Tehran called the report “reckless” and threatened to retaliate against Israeli critical infrastructure and US regional energy facilities.
• On July 31 the IRGC said it struck two tankers in the Strait of Hormuz; on August 1 a vessel was hit off the Oman coast near the entrance to the Strait.
• On August 1 the GCC condemned Iranian attacks targeting Kuwait, and US embassies across the Middle East issued escalation alerts.
• Iran’s Persian Gulf Strait Authority restated via IRNA on July 31 that the Strait of Hormuz remains closed to transit, citing continuing US military action.
• Caliber conflict This brief carried two bearish calibers on July 31 and August 1: recovering Hormuz tanker transits, and a 10-day ceasefire proposal submitted to Washington and Tehran. Iran’s own July 31 statement directly contradicts them. Both are carried side by side; until the conflict resolves, recovering transit should not be used as a pricing assumption (interpretation).

View — why this matters for aluminum, not just for crude

• Tehran named “US regional energy facilities” as a retaliation category. Gulf smelting capacity — EGA (UAE), Alba (Bahrain), Qatalum (Qatar), Ma’aden (Saudi Arabia), Sohar (Oman) — sits inside that radius and has already been hit once, on March 28 (EGA Al Taweelah 1.50 Mt/yr, Alba 1.60 Mt/yr).
• The timing coupling matters more than the threat itself: Gulf capacity is precisely the source of July’s +1.6% m/m ex-China output recovery. A strike on energy infrastructure, or Iran’s reciprocal retaliation, would reverse both the supply-recovery line and the energy-cost line at once — it is the only single event capable of overturning the entire bear case in one move (interpretation).
• But its nature must be stated with equal clarity: as of Saturday’s reporting the operation was unauthorized and may not happen. Pricing an unauthorized military plan into the center of the distribution is wrong; the correct treatment is to price it into variance — expressed on the board as gap risk at Monday’s open and higher implied volatility (interpretation).

Carried forward — dollar and Fed path (no weekend data)

• Dollar index 99.83 on July 31 (settle caliber) / 99.78 (TradingEconomics, −0.08%); −1.3% for July, worst month since April; +1.6% YTD.
• July 31 US data were 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%, 5-year 3.3%.
• The July 29 FOMC held at 3.50–3.75%, 9–3, with three dissents for a 25bp hike.
• September 16 pricing: the available calibers remain hike ≥25bp ~79.5%–81%, hold ~19%–20.5%, cut 0%; an alternative vendor caliber shows hold 29.8%, +25bp 50.6%, +50bp 19.6%. A confirmed post-July-31 snapshot still has not been obtained; no new figure is invented here.

Data — China macro

• July NBS manufacturing PMI 49.2 (from 50.3), a five-month low, below the 50.0 consensus; new orders 48.5 (from 51.2); employment 49.0 (+0.5).
• The July 30 Politburo meeting set the tone: more proactive fiscal policy plus appropriately loose monetary policy, stronger counter-cyclical adjustment, greater effort to expand domestic demand, and timely rollout of practical incremental policy.
• Upcoming: Monday August 3 brings the RatingDog/Caixin China manufacturing PMI for July and the US July ISM manufacturing print.

View — impact on aluminum

• Bullish: US-Iran escalation and preparations to strike Iran’s energy infrastructure (a tail, unauthorized); Iran’s own confirmation that Hormuz remains closed, putting the ~2 Mt Gulf supply-return timetable at renewed risk of slipping; Brent’s ~24% July raising ex-China smelting and freight costs; LME stocks at 271,275 mt, the lowest since 1998; the dollar’s 1.3% July decline; the Politburo’s expand-domestic-demand framing, with a weaker PMI raising the odds of incremental policy.
• Bearish: July aluminium processing PMI at 42.2, −4.4 points m/m, with all seven sub-sectors in contraction; China’s July manufacturing PMI 49.2 with new orders 48.5; ex-China daily average output +1.6% m/m — the overseas supply recovery has begun; Friday’s uniformly hawkish US data with the September hike threat intact; alumina down and shedding open interest for three sessions with SHFE alumina warrants building; bonded-zone stocks +20 kt; SHFE aluminum stalling on falling open interest two sessions running.
• Net: The weekend’s change is a lower center of gravity and a wider distribution. The demand side gained one independent and severe confirming negative, the supply side gained one clearly directional recovery negative, and the entire bullish increment rests on a single geopolitical event that has not happened and has not been authorized.

5 · Fundamentals

Data — July aluminium processing PMI at 42.2%, the most important industry release in this brief

• SMM expects most segments to remain below 50 in August, with no meaningful improvement in secondary-alloy sentiment.
• View The severity sits in three places. First, 42.2% is 4.4 points below June’s 46.6% and, on the history this brief can reconstruct, below every month except May’s 41.7%. Second, all seven segments are in contraction without exception — the “structural divergence” narrative that has cushioned this market for half a year was erased outright in July. Third, and most counter-intuitively, wire and cable collapsed: it had been the representative bright spot for power-grid demand, and a 21.1-point one-month fall in production with a 23.8-point fall in export orders means even the grid-plus-exports double support has given way (interpretation).
• View The direction matches the 60.2% leading-processor operating rate (−0.9 pt) but the magnitude does not. Operating rates measure how installed capacity is running; PMI measures the marginal change in orders and expectations. A PMI collapse normally leads an operating-rate decline, which implies operating rates fall further in August.

Data — overseas supply posts its first monthly recovery

• July ex-China daily average primary output rose 1.6% m/m, the first monthly recovery since the March strikes; the total was still −6.7% y/y.
• Drivers: resumptions in the Middle East and Iceland, plus ramp-ups in Indonesia, Vietnam, India, Brazil, Norway, Spain and Australia.
• EGA Al Taweelah progress: as of July 2, 89 of 1,262 pots were in operation; anode removal is complete across all pots, pot cleaning is about 90% done, and solidified aluminum has been cleared from over 20% of pots.
• New and restarting capacity: Slovalco (Slovakia, Hydro) plans a 75,000 mt resumption in Q4 2026; Magnitude 7 Metals (Missouri) adds 75,000 mt/yr by end-2026; Vedanta Balco (India) produced 168,000 mt in FY27 Q2, +10% q/q and +17% y/y; Alcoa’s Q2 total was 636,000 mt, +5% q/q, with completions at San Ciprián, Alumar, Lista and Portland; Rio Tinto is raising output at Kitimat and NZAS, with Arvida AP60 at full production by year-end.
• SMM’s August outlook: Middle East resumptions continue, Indonesian and Vietnamese projects keep ramping, Balco’s expansion keeps releasing; short-term m/m growth is expected, though market rumors of project delays warrant monitoring.
• View This release ends the one-way “ex-China supply only falls” narrative. The −6.7% y/y gap is still there and is the basis for LME’s valuation near $3,200; but the +1.6% m/m direction is the first measurable evidence that the basis has begun to erode (interpretation). It must be carried alongside the offsetting point: the physical vehicle of that recovery is exactly the category Tehran named as a retaliation target over the weekend, so the recovery path is itself reversible.

Data / new detail — domestic supply

• July China primary output +1.6% y/y and +3.5% m/m; built capacity about 46.29 Mt/yr (flat m/m); operating capacity about 45.31 Mt/yr, operating rate near 99%, closing on the 45 Mt policy ceiling.
• Liquid-aluminium ratio 78.3%, +1.1 points m/m, a larger rise than expected; cast-ingot volume −15.1% y/y and −1.4% m/m.
• SMM forecasts the August liquid ratio at 78.5%, just +0.2 points. View A deceleration from +1.1 to a forecast +0.2 is a direct quantitative signal that the cast-ingot contraction is close to its limit — decisive for the direction of inventory from here.
• SMM attributes July’s above-expected liquid-ratio rise to high processing fees for aluminum rod and billet, which stimulated downstream procurement — not to improving end demand. View Processing-fee-driven diversion of liquid metal is a price phenomenon, not a demand phenomenon, and it is not sustainable against a 42.2 processing PMI.

Carried forward — alumina and overseas premiums

• Alumina operating capacity about 96.2 Mt/yr at roughly 78% utilization, with output growing about 8% — faster than metal — so the surplus persists and is worsening; AO2609 fell three straight sessions to 2,621 with a new 2,618 low; national alumina inventory 7.028 Mt (+24 kt w/w); Guangxi’s new capacity is ramping.
• EGA’s Al Taweelah alumina refinery restarted on July 10; it produced 2.4 Mt in 2025, meeting 46% of EGA’s own alumina requirement, and EGA expects the technical capability to return to full output by end-2026. View This is a marginal addition to ex-China alumina supply, aligned with the domestic surplus and continuing to press the cost side lower.

• Overseas spot: SMM’s July 31 weekly note described the ex-China primary market as broadly weaker, with off-season trading thin and Asian and US regional premiums generally easing.

Carried forward — downstream demand

• PV remains the only clear bright spot: PV-frame operating rates are stable, with China’s module output projected to rise from about 38.5 GW in July to 39.3 GW in August ↑.
• Construction and property remain weak (property investment about −18%; Jan–May new starts −22.6% y/y); autos and the power grid are holding; packaging is steady.
• Exports: June exports +27% and May semis 595 kt still support the balance; but the wire-and-cable export-orders index collapsing from 47.0 to 23.2 indicates the export impulse has already broken in some categories (interpretation).
• Balance: one vendor (Macquarie) forecasts a roughly 930,000 mt global deficit for 2026. (Labeled as a third-party estimate, not measured data.)

Carried forward — the supply offset

• Indonesia: primary exports rose from 155 kt in 2024 to 511 kt in 2025 and a further +58% y/y in Jan–May 2026; 11 planned new smelters totaling about 13 Mt/yr; Huaxin’s 480 kt/yr is ramping; Kaltara’s phase 1 of 500 kt/yr targets full output in October 2026; Vietnam’s Dak Nong phase 1 of 150 kt/yr started up in Q2 2026. Guinea is advancing bauxite export controls while planning five alumina refineries totaling about 7.2 Mt/yr.

6 · Primary Aluminum Spot Market

Data — markets closed; the following is the latest July 31 caliber

• Overall: spot stopped following futures entirely, shifting from chasing higher to zero change and small pullbacks. Shanghai and Foshan flat, Wuxi and Hangzhou −10 each, Chongqing −30.
• East China: Shanghai 23,630 (0), Wuxi 23,600 (−10), Hangzhou 23,650 (−10). The basis is par to the close and a 35-yuan discount to the settlement (own computation).
• South China: Nanhai/Foshan 23,740 (0), 110 over Shanghai. SMM’s mainstream quotes ran a 30-to-10-yuan discount to the board, while actual trades clustered at an 85-to-125-yuan premium over the 2608 contract. Market description: traders held prices up at month-end and then accelerated selling to monetize; downstream buyers were reluctant at high prices with very low procurement willingness; “oversupply persists and trading was rather lackluster.”
• Southwest: Chongqing 23,630 (−30), the largest national decline on the day.
• Secondary: ADC12 national average 24,200 (0), flat across all four regions; 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.

View — shipment and procurement willingness (no weekend update; carried forward)

• Shipment willingness: firm. The month-end pattern of holding prices up and then accelerating sales to monetize points to holders lacking confidence in the sustainability of high prices.
• Procurement willingness: weak. “Reluctant at high prices,” “no buying beyond rigid demand,” and “bidding down with limited concessions” all describe buyers waiting for a pullback rather than fearing they cannot secure metal.
• August 2’s 42.2 processing PMI now provides the quantitative backing for those qualitative descriptions: secondary alloy at 37.6% is the weakest of the seven segments, and ADC12 quotes went to zero change across the board on July 31 after two sessions of broad gains — the stall in physical quotes and the collapse in the orders index corroborate each other at the same point in time (interpretation).

7 · Key Price Drivers

Bullish

• The geopolitical tail widened sharply (the weekend’s most important new bullish item, but an unauthorized event): the US and Israel are reported to be preparing large-scale strikes on Iran’s energy infrastructure, with Kharg Island the highest-value target and a window possibly inside 48 hours; Tehran has threatened to retaliate against US regional energy facilities. The five major Gulf smelters (EGA, Alba, Qatalum, Ma’aden, Sohar) sit inside that radius, with a March 28 precedent.
• Hormuz closure restated by Iran itself: the Persian Gulf Strait Authority said via IRNA on July 31 that the Strait remains closed; the IRGC said the same day it struck two tankers; a vessel was hit off Oman on August 1. The ~2 Mt Gulf supply-return timetable faces renewed slippage risk.
• Ex-China stocks remain at a historic floor: LME stocks 271,275 mt (July 24), the lowest since January 1998, below the prior 271,450 mt low of August 2022; on-warrant 245,350 mt, under one day of global consumption; down from about 420,000 mt in January.
• China’s absolute inventory level is still falling: 953 kt (July 30), −512 kt (−35%) from the May high; SHFE warrants −6,350 w/w; SMM expects the destock to continue in August.
• Cost and dollar: Brent’s ~24% July, the strongest month since March, lifting ex-China smelting and freight costs; the dollar at 99.83, −1.3% in July; the SHFE/LME ratio back to 7.4 with the import window still deeply shut (~3,300 yuan/mt loss), so foreign metal cannot flow in.

Bearish

• July aluminium processing PMI at 42.2%, −4.4 points m/m, with all seven sub-sectors in contraction (the day’s most important new bearish item): foil 39.0 (production and new orders both 31.8), secondary alloy 37.6, construction extrusion 39.7, industrial extrusion 42.1, primary alloy 43.9, wire and cable 44.4 (production 36.4, −21.1 pt; export orders 23.2, −23.8 pt), plate/sheet/strip 44.8. SMM expects most segments below 50 in August.
• Three independent demand reads now point the same way: processing PMI 42.2 + NBS manufacturing PMI 49.2 (new orders 48.5) + weekly ingot withdrawals 127,700 mt. The structural-divergence narrative was erased outright in July.
• The overseas supply recovery has begun: July ex-China daily average output +1.6% m/m, the first monthly recovery since March; EGA, Slovalco, Magnitude 7, Balco, Alcoa and Rio Tinto adding simultaneously; SMM expects further m/m growth in August.
• The destock is a low-throughput balance, not a consumption destock: the liquid ratio at 78.3% (+1.1 pt) and cast ingot at −15.1% y/y / −1.4% m/m compress the inflow; withdrawals at 127,700 mt compress the outflow. SMM’s August liquid-ratio increment drops to +0.2 points, signalling the cast-ingot contraction is near its limit and inventory could reverse.
• The cost side keeps collapsing: AO2609 down three straight sessions to 2,621 with a new 2,618 low and three straight sessions of position reduction; SHFE alumina warrants +4,289 w/w; national alumina inventory 7.028 Mt (+24 kt); Guangxi ramping; EGA’s Al Taweelah refinery restarted and targeting full capability by year-end.
• The US rates side has not loosened: July 31’s ECI +0.9%, Chicago PMI 57.6, UMich 55.2 and 1-year inflation expectations of 4.2% all beat; September hike odds run ~70%–81% on available calibers. The dollar’s July decline lacks rate-side support.
• Positioning and structural reads: SHFE open interest fell two sessions running (−3,175 on Jul 30, −3,338 on Jul 31 to 247,263) with volume −33.2% on July 31; bonded-zone stocks +20 kt w/w; Henan built 14,010 mt in one week against a 6,350 mt national net draw.

8 · One-Sentence Market View

9 · Watchlist for the August 3 Monday Reopen and Night Session

1. The direction and size of Monday’s gap (the only new top-priority item this week): the weekend contains an unauthorized but publicly reported window for military action against Iranian energy infrastructure, Kharg Island, inside 48 hours. If it occurs before Monday’s open, crude, LME and SHFE gap higher together and renewed damage risk to Gulf smelting capacity reprices immediately; if it does not and the reporting is played down, the weekend’s geopolitical premium deflates quickly after the open and the board returns to the fundamental track defined by a 42.2 processing PMI. The two paths are opposite and should not be pre-assumed.
2. A fifth test of $3,200: four approaches, zero closes above, and the fourth came in the same week China’s demand data deteriorated. If LME cannot return quickly to $3,200 on Monday, the high of this move was most likely set at $3,211.50 on July 30; support runs MA20 (~$3,183), MA5 (~$3,178), MA10 (~$3,173).
3. Whether SHFE open interest stops falling (the key falsification test, which has answered bearish twice): −3,175 on July 30 and −3,338 on July 31, a two-day draw of 6,513 lots to 247,263. Continued liquidation near 23,630 on Monday confirms this leg as short-covering and fixes 23,725–23,760 as the high; only rising price on rising open interest overturns that. Support 23,500 and MA5 (~23,588).
4. Monday’s SMM weekly ingot inventory and withdrawals: the question is not only whether 953 kt falls further, but whether withdrawals recover from 127,700 mt. Against a 42.2 processing PMI, a further decline in withdrawals would lock in the low-throughput reading and discount the destock’s price support further. Watch also whether bonded-zone stocks build beyond 113.4 kt.
5. The August 3 PMI double-header: RatingDog/Caixin China manufacturing PMI for July and US July ISM manufacturing. The first is an independent cross-check on the NBS 49.2 (a sub-50 Caixin print makes the demand deterioration a two-caliber confirmation); the second tests July 31’s 57.6 Chicago PMI and feeds directly into September rate pricing and the dollar.
6. How alumina’s futures-spot divergence resolves: AO2609 down three sessions to 2,621 with a 2,618 low while spot has not moved. Watch whether Monday brings spot catching down (confirming the surplus) or futures recovering 2,650; plus Guangxi ramp progress and EGA Al Taweelah refinery restart progress.
7. Testing the nature of the spot basis and the Foshan spread: par has held two sessions, but through bilateral paralysis. Watch whether A00 can strengthen to a premium without futures falling, and whether the 110-yuan Foshan-over-Shanghai spread converges as arrivals recover (SMM has stated arrivals were the cause).
8. Resolving the Hormuz caliber conflict: Iran says the Strait is still closed, while earlier vendor calibers reported recovering transits and a 10-day ceasefire proposal. Watch Monday’s actual tanker transit data, whether either side accepts the ceasefire proposal, and whether Brent holds the $88 line after a ~24% July.