SHFE loses its 60-day average at 23,595 and retraces the entire August advance. Yet all three Chinese regions keep destocking.沪铝跌破 60 日均线至 23,595,8 月涨幅全部回吐;但中国三大地区仍在去库。

1 · Market Performance

Stated first: the writing point and the calibers

• This edition is written on the morning of Friday, August 21.
• ⊘ The August 20 night session (21:00 August 20 to 01:00 August 21) is carried for aluminium and alumina on SMM’s overnight-report caliber ONLY: the 08:34 August 21 report gives SHFE aluminium −0.47% and LME aluminium −1.62% without levels, and SMM’s Aluminum Morning Meeting Summary had not published at writing.
• ⚑ The cast-alloy night session IS precise, from SMM’s August 21 cast aluminium alloy morning comment: AD2610 opened 22,900, dipped to 22,820, rose to 22,960 and closed 22,895, −0.22%.
• ⚑ A caliber result this edition: recomputing the August 19 window from raw exchange files now reproduces ALL SIX published SHFE averages and ALL FIVE published LME averages exactly. The MA30/MA40/MA60 discrepancies of 4.50, 1.63 and 0.34 that the prior edition listed and declined to reconcile are gone — they arose from an insufficient history, which this edition’s window resolves.

⚑ SHFE: MA60 lost by 12.17, and the entire August advance is given back

• ⚑ AL2610 (main, open interest 270,037, +1,005): open 23,655, high 23,720, low 23,525, close 23,595, settlement 23,630, previous settlement 23,740; −145 on the previous settlement (−0.61%), −110 settlement-over-settlement (−0.46%), and −80 (−0.34%) close-over-close against August 19’s 23,675; volume 170,293.
• ⚑ The day’s low of 23,525 is the LOWEST INTRADAY LOW SINCE AUGUST 3’s 23,460, and it sits 44.00 BELOW MA30 at 23,569.00 (this is a derivation).
• AL2609: open 23,650, high 23,705, low 23,525, close 23,585, settlement 23,615; −135 on the previous settlement, −65 (−0.27%) close-over-close; volume 72,708, open interest 128,418 (−15,946).
• AL2611 close 23,595, open interest 92,432 (+9,122); AL2612 close 23,570, open interest 59,471 (+488); AL2701 close 23,540, open interest 36,740 (+630).
• Whole-product aluminium volume 307,317 (from 367,560, −16.4%), open interest 618,758 (−3,901).

⚑ Moving averages: the last average is surrendered

• ⚑ Verification: recomputing the August 19 window from the raw exchange files reproduces the published MA5 23,928.00, MA10 24,019.00, MA20 23,756.00, MA30 23,551.17, MA40 23,364.00 AND MA60 23,622.00 — all six, exactly.
• The underlying closes (main = highest-open-interest contract): July 29 23,455, July 30 23,625, July 31 23,630, August 3 23,640, August 4 23,810, August 5 23,785, August 6 23,810, August 7 24,040, August 10 24,165, August 11 24,250, August 12 24,285, August 13 24,090, August 14 23,885, August 17 24,035, August 18 23,955, August 19 23,675, August 20 23,595.
• ⚑ SHFE aluminium averages (to August 20, 75 sessions): MA5 23,829.00, MA10 23,997.50, MA20 23,768.50, MA30 23,569.00, MA40 23,382.25, MA60 23,607.17.
• ⚑ The close of 23,595 is 234.00 below MA5, 402.50 below MA10, 173.50 below MA20 and 12.17 BELOW MA60 (lost); it holds only MA30 by 26.00 and MA40 by 212.75.
• ⚑ MA60 IS LOST. It was held by 53.00 on August 19 and surrendered by 12.17 on August 20; the price now sits beneath four of its six averages (this is a derivation).
• ⚑ The twenty-session window runs July 24 to August 20, close range 23,195 (July 27) to 24,285 (August 12), placing 23,595 at the 36.7th percentile, from 44.0. The sixty-session window runs May 28 to August 20, range 22,370 to 24,825, percentile 49.9, from 53.2.
• ⚑ 23,595 is the lowest main-contract close since July 29’s 23,455 — sixteen sessions — and it retraces 690 of the 645-point August 3-to-August 12 advance, or 107.0%, leaving the close 45 BELOW the August 3 starting close of 23,640 (this is a derivation).

⚑ Alumina and cast alloy: alumina’s main contract now out-opens aluminium’s

• AO2610 (main, open interest 311,383, +11,744): open 2,668, high 2,687, low 2,650, close 2,663, settlement 2,667, previous settlement 2,672; −9 on the previous settlement, −5 (−0.19%) close-over-close; volume 229,336. AO2609 close 2,660, settlement 2,666, open interest 82,728 (−5,191); AO2701 close 2,725, open interest 83,149 (+2,191).
• ⚑ Whole-product alumina volume 303,904 (from 173,376, +75.3%), open interest 575,390 (+8,357).
• ⚑ The flow reversed again and crossed a threshold: alumina’s volume of 303,904 now essentially MATCHES aluminium’s 307,317 (a ratio of 1.01×, from 2.12× on August 19), and AO2610’s open interest of 311,383 EXCEEDS AL2610’s 270,037 by 41,346 lots — the raw material’s main contract now carries more open interest than the metal’s (this is a derivation).
• AD2610 (main, open interest 18,303, −49): open 22,905, high 23,075, low 22,855, close 22,945, settlement 22,970, previous settlement 22,950; −5 on the previous settlement, +20 settlement-over-settlement, and +5 (+0.02%) close-over-close; volume 6,730. AD2609 close 22,880, settlement 22,920, open interest 4,212 (−185). Whole-product volume 10,839, open interest 24,102 (−201).
• ⚑ AD2610 is the ONLY one of the three contracts that closed higher, by five yuan, the session after it surrendered its last average (this is a derivation).
• ⚑ Alumina averages: MA5 2,681.00, MA10 2,691.50, MA20 2,679.30, MA30 2,686.50, MA40 2,702.53, MA60 2,756.08. The close of 2,663 is below all six for a THIRD consecutive session, 16.30 under MA20.
• ⚑ Cast alloy averages: MA5 23,067.00, MA10 23,306.00, MA20 23,262.75, MA30 23,167.50, MA40 23,056.00, MA60 23,096.58. The close of 22,945 is below all six for a second session and sits at the 0.7th percentile of its twenty-session close range of 22,940–23,645 (this is a derivation).

⚑ LME: the contango collapses from −$20.50 to −$1.00, stocks unchanged a third day

• ⚑ Westmetall official caliber: August 20 cash settlement $3,182.00 (−$9.50, −0.30%), three-month $3,183.00 (−$29.00, −0.90%).
• ⚑ The cash-to-3M spread is −$1.00 — the contango COLLAPSED from −$20.50 on August 19, because the forward fell $29.00 against the cash’s $9.50. The series: +$2.00 (August 14) → $0.00 (August 17) → −$15.00 (August 18) → −$20.50 (August 19) → −$1.00 (August 20).
• ⚑ Stocks 246,925 mt, UNCHANGED FOR A THIRD CONSECUTIVE SESSION; August 17, 18, 19 and 20 are four identical prints.
• Cash is −$191.00 (−5.66%) from the August 11 cycle high of $3,373.00.
• ⚑ This brief’s own LME averages: MA5 $3,222.50, MA10 $3,267.90, MA20 $3,243.03, MA40 $3,192.94, MA60 $3,302.45. Cash at $3,182.00 remains below all five, and the shortfall against MA40 has widened from $0.19 to $10.94.
• ⚑ SHFE and the LME moved together and by nearly the same amount this session — −0.34% against −0.30% — with the ratio slipping only 7.418 to 7.415 (this is a derivation).
• ⊘ TradingEconomics carries aluminium at $3,187.50, −$44.45 (−1.38%) on an August 20 stamp; SMM’s overnight report gives LME aluminium −1.62%. All three calibers agree in DIRECTION this session, resolving the prior edition’s split, but disagree in magnitude across −0.30%, −0.90%, −1.38% and −1.62%; listed and NOT reconciled.

Interpretation

• The top is finished, and ‘pullback’ is no longer the right word. MA60 was the one average still held on Wednesday, by fifty-three points, and it is surrendered by twelve. The price now holds only MA30 and MA40 — and those sit below the sixty-day line only because the sixty-day window still contains June’s much higher prices.
• A 107% retracement is a change of kind, not degree. Giving back the whole advance is round-tripping; giving it back and closing 45 beneath the starting point means every buyer since August 3 is now offside.
• But the position structure did not break. AL2610 added 1,005 lots, AL2611 added 9,122, and the whole product fell only 3,901 — this is rolling and absorption, not a rout.
• Alumina’s open interest overtaking aluminium’s is the structural item most likely to be overlooked. When the raw-material contract carries more open interest than the finished-metal contract, the centre of price formation is migrating to the cost side.

2 · Aluminum Prices and Related Markets

⚑ Spot: a second consecutive session at a premium

• A00 aluminium ingot, August 20: 23,600 yuan/mt (range 23,580–23,620), −70 (−0.30%). The same series printed 23,670 (range 23,650–23,690) on August 19, reproducing SMM’s own quotation exactly.
• ⚑ Basis: a +15 PREMIUM against AL2609’s close of 23,585 and +5 against AL2610’s 23,595 — a second consecutive session of premium, narrowing from +20 (this is a derivation).
• ⚑ CALIBER WARNING, and it matters: SMM’s own August 20 transaction caliber for East China is a DISCOUNT of 20 to 0 yuan/mt against the September contract, which is not the same measurement as the A00 quotation minus the futures CLOSE. Both are listed; they are NOT reconciled.
• ⚑ SMM’s own regional transaction ranges against AL2609, August 20: South China (Foshan) a PREMIUM of 75 to 115, with mainstream quotations at a premium of 0 to +10 and the centre ‘steadily moving upward’; East China a discount of 20 to 0; Central China a discount of 70 to 90.
• ⚑ SMM’s A00 weekly average for August 17–20 is 23,810 yuan/mt, −1.4% on the prior weekly average.

⚑ Alumina: the market splits, and the China-overseas spread widens to 384.55 yuan

• ⚑ SMM’s alumina index reads 2,681.62 yuan/mt as of Thursday, −0.46 on last Thursday and −1.81 on the August 19 figure of 2,683.43.
• Regional spot: Shandong 2,650–2,720 (−10 w/w), Henan 2,690–2,750 (−10), Shanxi 2,680–2,740 (−10), Guangxi 2,580–2,640 (−5), Guizhou 2,720–2,790 (−10).
• ⚑ Against August’s national weighted-average full cost of 2,700–2,820 the index sits 18.38 BELOW the floor; against the cash-cost band of 2,530–2,650 it sits 31.62 ABOVE the ceiling (this is a derivation).
• ⚑ Ex-China is moving the other way: an August 20 trade at $363/mt FOB East Australia for 30,000 mt or $364/mt for 50,000 mt, seller’s option, October shipment — against $358/mt FOB East Australia on August 13.
• Other trades this week: $362.5 FOB West Australia (August 14, September shipment); $409 CIF Rotterdam for 63,000 mt (August 14); $400 FOB Jamaica for 30,000 mt (August 14); $374 CFR Malaysia (August 13).
• ⚑ SMM prices FOB Western Australia at $360/mt as of August 13, with $32/mt freight and a 6.74 USD/CNY selling rate, equivalent to approximately 3,066.17 yuan/mt at mainstream Chinese ports — 384.55 yuan/mt ABOVE the domestic index.
• SMM attributes the ex-China strength to Middle East transportation problems raising demand for bagged alumina, and to tight Indonesian bauxite limiting local production.

Chinese alumina supply and inventory

• Metallurgical-grade installed capacity 118.42 million mt/year, operating capacity 88.01 million mt/year; the national weekly operating rate was FLAT w/w at 74.33% (Shandong 89.14%, Guizhou 83.05%, Guangxi 78.05%, Shanxi 64.9%, Henan 56.53%). Weekly production 1.688 million mt.
• Spot procurement: Xinjiang took 5,000 mt at 2,960 yuan/mt delivered and 10,000 mt at 2,985 yuan/mt delivered.
• ⚑ Total China alumina inventory −30,000 mt to 7.245 million mt: smelter raw-material stocks −9,000 to 3.399 million, refinery finished stocks −3,000 to 1.217 million, port stocks −35,000 to 1.016 million, warrants +15,000 to 288,000, in-transit +2,000 to 1.325 million.

Secondary aluminium and alloy

• ⚑ The theoretical ADC12 spot premium over AD2610’s 10:15 price was 955 yuan/mt on August 20, on SMM’s own caliber. ⊘ This is not directly comparable with the prior edition’s close-based 1,260.
• Registered cast alloy warrants 19,998 mt on August 20, −392 from the previous trading day.
• ⚑ July unwrought aluminium alloy imports 59,900 mt, −14.5% y/y and +8.7% m/m; January–July 493,400 mt, −19.4% y/y. Exports 58,600 mt, +135.1% y/y and −12.8% m/m; January–July 297,100 mt, +104.6% y/y.

Interpretation

• The physical refusing to follow the paper for a second straight session is the most informative price fact in this edition. On August 19 spot fell less than futures; on August 20 A00 fell 70 while AL2609 fell 65, narrowing the basis only from +20 to +15 — on the day the paper completed a 107% retracement, the physical barely moved.
• The ‘alumina cost collapse’ story should now be dropped entirely. On SMM’s own caliber the index moved 0.46 yuan in a week. What is actually moving is the overseas price, and it is moving up.
• The 384.55-yuan spread is an import-window signal. If it persists, imported alumina stops being economic in China, which means the domestic surplus can only clear through production cuts or exports — and a flat 74.33% operating rate says cuts have not begun.

3 · Inventory

⚑ All three regions destocked, and this brief withdraws its inventory-turn call

• ⚑ SMM’s August 20 spot midday review: ingot inventory in the major consuming regions fell 10,500 mt day-over-day, and ALL THREE REGIONS destocked.
• ⚑ SMM’s own August 20 analysis, verbatim: ‘aluminum ingot inventory continued its destocking trend, providing bottom support for aluminum prices.’
• ⊘ The absolute level of the three-region daily series and SMM’s Thursday social inventory print were not retrievable at writing; the carried levels are the August 18 three-region figure of 707,000 mt and the Monday August 17 social figure of 886,000 mt.
• LME stocks 246,925 mt, unchanged for a third consecutive session.
• ⚑ Cast aluminium alloy ingot social inventory 28,100 mt, +2,500 mt w/w — a SECOND consecutive week of buildup with the pace WIDENING, ending the ten-week destock. SMM attributes it to the demand off-season, low downstream purchase willingness and slow shipments, plus periodic spot-futures arbitrage procurement, and expects a continued mild rise.
• Secondary aluminium alloy ingot inventory 10,275 mt, +333 mt d/d (Foshan +296, Ningbo +37).
• Carried: Japan’s three major ports at 201,000 mt at end-July, the lowest since April 2010; billet inventory 93,500 mt on the August 19 two-region caliber.

Interpretation

• This brief argued for four consecutive editions that the domestic destock had turned. That call was wrong and is withdrawn. What turned were the smaller, more peripheral series — LME stocks flat three days, cast alloy building two weeks, secondary alloy +333 — and this brief let them speak for the whole column.
• The primary domestic ingot series did not build; it drew, in all three regions at once. That is the only fact that explains a market where the paper broke and the physical refused to sell.
• The caution is that the level is unknown. This edition can confirm the direction and size of the change (−10,500 mt) but not the absolute stock. If the Thursday social print later shows a build, the daily and weekly calibers will conflict and the withdrawal announced here will itself need re-examining.

4 · Macro Factors

⚑ The Fed: the hawkish digestion arrived one day late, as flagged

• ⚑ Investing.com’s Fed Rate Monitor, updated August 20 at 20:35 EDT: September 16 FOMC at 64.7% hold and 35.3% HIKE to 3.75–4.00%, off fed funds futures at 96.325. That 35.3% is ABOVE the 30.6% of August 19 and the 33.3% of August 18.
• October 28: hold 51.3%, one hike 41.4%, two hikes 7.3%, off futures at 96.275 (from 56.6/37.7/5.6).
• December 9: 3.50–3.75% 34.4%, 3.75–4.00% 44.7%, 4.00–4.25% 18.5%, 4.25–4.50% 2.4%, off futures at 96.165 — implying approximately 65.6% odds of at least one hike by December, from 64.3% (this is a derivation).
• Jackson Hole runs AUGUST 27–29, with Chair Warsh’s first address as Chair on Friday, August 28.

The dollar, employment and energy

• ⚑ The dollar index reads 98.824 on August 21, −0.04% on the session and −2.28% over four weeks — a SECOND consecutive session below 99. ⊘ TradingEconomics gives the twelve-month change as +1.13% against the +0.24% carried on August 20; a stamp or caliber artefact, not reconciled.
• ⚑ NEW: initial jobless claims for the week ending August 15 came in at 206,000, down 6,000 from a revised 212,000 and BELOW the 210,000 consensus; continuing claims for the week ending August 8 rose 18,000 to 1,799,000; the four-week moving average rose 4,250 to 204,000.
• Brent $93.49 on August 21, −$0.29 (−0.31%), month −0.62%, year +38.03%, on track for a SECOND consecutive weekly gain of more than 5%; SMM’s overnight report has Brent +1.77% and WTI +2.16% overnight, a FIFTH consecutive session of gains.
• Overnight COMEX gold +0.66% with an intraday high of $4,597.1/oz; COMEX silver +3.5%.

⚑ China policy: the LPR held for a fifteenth month

• ⚑ The August LPR, announced August 20: the one-year at 3.00% and the five-year-plus at 3.50%, both unchanged and now held for a FIFTEENTH consecutive month.
• All 25 market participants surveyed by Reuters expected no change; the seven-day reverse repo rate has likewise been on hold for fifteen months since its May 2025 cut, so the pricing basis for the LPR quotes did not shift this month.

Geopolitics and trade

• The UAE’s suspension of all trade, commercial exchange and financial transactions with Iran — announced August 19 after two ballistic missiles were fired toward the Gulf state on August 18 — remains in force. Iran denies the launch.
• ⊘ Lloyd’s List Intelligence reports 68 Hormuz transits between July 27 and August 2 and 60 between August 3 and 9, up from 34 and 35 in the two weeks immediately after the transit memorandum lapsed. ⊘ Trump says no talks with Iran are underway or scheduled.
• ⚑ Canada’s first-half 2026 aluminium exports were 2.68 million tonnes, −1.86% y/y, with shipments to the UNITED STATES down 25.03% to 1.04 million tonnes. The Netherlands took 158,210 tonnes (+111.9%), Mexico 61,669 (+126.07%), Italy 55,523 (+54.3%) and Greece 10,009. ⚑ Only about 42% of the lost US volume was recovered by other importing nations.
• ⚑ The EU has RAISED CBAM default values for aluminium derivatives: Implementing Regulation (EU) 2026/1740, published July 31 and applying retroactively from January 1, 2026, raises the unknown-origin precursor default for CN 7616 99 10 from 3.080 to 4.542 tCO₂e/tonne and for CN 7616 99 90 from 3.770 to 5.559 — increases of approximately 47.5%. Primary unwrought aluminium under CN 7601 is barely changed. Tunisia’s base defaults were corrected to 1.440 tCO₂e/tonne for most CN 7616 entries and 0.760 for CN 7616 99 10.

Interpretation: the net direction of the macro column

• Hike odds rose 4.7 points and the dollar did not move. That is the item worth recording. A currency that ignores a material shift in rate probability is telling you its pricing centre is somewhere other than the hiking path.
• Claims at 206,000, better than expected, are bearish for aluminium — labour resilience alongside tepid inflation supports keeping the hike option alive.
• The LPR unchanged for fifteen months means the monetary side still offers nothing against January–July fixed-asset investment at −6.7%.
• ⚑ Trade policy has replaced inventory as the substantive bear source in this edition. Canada’s exports to the US −25%, CBAM defaults up 47.5%, and SMM’s explicit warning that export demand will weaken all point the same way.

5 · Fundamentals

⚑ July customs data — all new this edition

• Primary aluminium imports approximately 185,000 mt, +10.8% m/m and −25.4% y/y; January–July approximately 1.472 million mt, −1.8% y/y.
• Primary aluminium exports approximately 32,000 mt, −17.9% m/m and −23.2% y/y; January–July approximately 146,000 mt, +14.1% y/y.
• Net primary imports 154,000 mt, +19.4% m/m and −25.9% y/y; January–July approximately 1.326 million mt, −3.3% y/y.
• ⚑ Aluminium scrap imports approximately 120,000 mt, −25% y/y and −9.8% m/m — a FOURTH consecutive monthly decline; January–July 1.101 million mt. Thailand supplied 20.4% of the total, ahead of the UK, Japan, the US and Australia.
• ⚑ Bauxite imports 19.044 million mt, −6.3% m/m; January–July 140.12 million mt, +13.5% y/y. Guinea supplied 14.879 million mt in July, −6.1% m/m and −6.7% y/y, with January–July cumulative Guinean imports of 113.288 million mt, +18.5% y/y.
• ⊘ Customs also reports January–July aluminium semis exports +16.7%.

⚑ Overseas supply and policy

• ⚑ EGA’s H1 2026 results: adjusted net profit $670 million, +34% y/y; reported net income $473 million after a $197 million negative impact from the March 28 attack; revenue Dh13.5 billion, −10% y/y.
• ⚑ Aluminium production 602,000 tonnes, −47% y/y; aluminium sales 939,000 tonnes, −32% y/y, on logistics constraints and the closure of the Strait of Hormuz.
• ⚑ Al Taweelah restoration capex approximately $400 million, most of it in 2026 with some in 2027; production is expected back at pre-incident levels in Q1 2027. The H1 average LME price was $3,382/tonne against $2,538 a year earlier.
• Nanshan Aluminum’s semi-annual report confirms Indonesian projects under construction at Bintan Industrial Park for 250,000 mt/year of aluminium and 260,000 mt/year of carbon with wharf, reservoir and slag-yard facilities, plus a planned JV (PT. Bintan Fine Chem Indonesia) for 200,000 mt/year of caustic soda and 165,000 mt/year of epichlorohydrin.
• Carried: EGA’s Guinea bauxite settlement; ⊘ the conflicting Al Taweelah lines of 18% of capacity with Q1 2027 full capacity against ‘could take a year to resume’; ⊘ secondary estimates of 3–3.5 million mt of combined EGA and Alba disruption and the Middle East at roughly 9% of global smelting capacity; Alunorte ramping back to full; Tomago with A$2.5 billion of support from 2029; Slovalco and the Missouri smelter pending restart.
• ⊘ The LME warrant-concentration thesis remains uncorroborated after the August 19 delivery date passed without a squeeze; stocks have printed unchanged four times and the circulating warrant figures are an early-August caliber. Treat it as stale.

⚑ Downstream: PV frames tick up, but it is front-loading

• ⚑ SMM reports a modest uptick in operating rates at sampled PV frame producers. The US finalised new import adjustment rules for polysilicon and its derivatives in early August, with the related tariffs taking effect in DECEMBER; expectations of front-loaded shipments during the policy buffer window produced marginal growth in US-bound export orders from Chinese module makers, indirectly boosting demand for frames.
• But frame producers report sufficient orders on hand and already-high utilisation, with low processing fees and squeezed margins making them cautious on new external orders, limiting further upside. Some also warn that a rebound in polysilicon prices raises module costs and may cause module makers to lower production schedules, dragging frame demand lower.
• ⚑ SMM warns explicitly that the recovery of the domestic-to-overseas price ratio and the digestion of orders on hand suggest EXPORT DEMAND WILL WEAKEN GRADUALLY, and that domestic terminal demand is modest at best, with some market concern about peak-season demand.
• Carried: July output +1.6% y/y and +3.5% m/m; month-end capacity approximately 46.29 million mt; July liquid-aluminium ratio 78.3% with an August forecast of 78.5%; July casting-ingot output −15.1% y/y; July billet operating rate 58.3% with an August forecast near 56.9%; July aluminium processing PMI 42.2% with all seven sub-sectors contracting; passive cuts in southwest China continuing.
• Carried: CPCA July passenger-vehicle retail 1.461 million units, −20.9% y/y, with NEV exports +147.8%.

Interpretation

• July net imports of 154,000 mt read two ways at once: up 19.4% month on month says the import window had already improved before August, while down 25.9% year on year says the annual supply picture is still tighter than 2025.
• Scrap imports down 25% year on year for a fourth straight month is a hard cost constraint under secondary alloy. It also explains the apparent contradiction of a 955-yuan ADC12 theoretical premium alongside a second week of cast-alloy inventory buildup: cost is holding the price up, demand is not holding the inventory down.
• The PV-frame uptick is front-loading, not demand improvement. US tariffs bite in December, which means this demand is being pulled into September–November and a gap follows.

6 · Primary Aluminum Spot Market

⚑ South China: holders withdrew, and concessions almost disappeared

• SMM’s August 20 South China daily review: futures extended their decline while South China spot remained stable to firm. The cumulative decline in absolute prices was already substantial, clearly breaking below the monthly average; combined with inventory continuing to destock steadily and a sizeable single-day fall, these two tailwinds prompted widespread holding back from selling among cargo holders, ‘with price cuts and concessions almost disappearing’.
• Mainstream quotations were at a premium of 0 to +10 yuan/mt, with the centre ‘steadily moving upward’ and liquidity ‘noticeably tightened’.
• On the demand side, downstream took advantage of low prices to continue ramping up restocking, providing solid bottom support. With circulating cargo already limited, traders attempted to push prices lower to take in cargo but ‘found it hard to source cheap lots’; they eventually turned to actively absorbing cargo at flat prices and ‘even accepted small premiums without hesitation’.
• ⚑ The supply-demand pattern tightened and overall transaction feedback was positive. Transaction prices centred on a premium of 75 to 115 yuan/mt over the AL2609 contract.

⚑ East and Central China: the East China discount narrows, Central China stays quiet

• East China: Wuxi destocked, consumption sentiment ‘improved significantly from yesterday’, and spot discounts narrowed; transactions were around a discount of 20 yuan/mt to 0 against the September contract.
• Central China: futures adjusted slightly and the trading atmosphere remained sluggish. Prices stabilised and stopped falling sharply, but downstream processors’ wait-and-see sentiment did not diminish; only a few top-tier players maintained small restocking, while suppliers showed a clear intention to hold prices firm, so the downward pressure on quotes was not strong. Transactions centred on a discount of 70 to 90 yuan/mt against the September contract.

⚑ Sentiment indices (SMM, August 20 — a daily caliber this edition)

• East China: shipment sentiment index 3.2 (−0.01 d/d); procurement sentiment index 3.16 (+0.04 d/d).
• Central China: shipment sentiment index 3.1 (−0.01 d/d); procurement sentiment index 2.9 (unchanged d/d).
• ⊘ These are day-over-day changes and are NOT directly comparable with the August 17 week-over-week figures carried in the prior three editions.

Interpretation: reading the sentiment

• The South China description is the strongest physical evidence in this edition. ‘Found it hard to source cheap lots’ and ‘accepted small premiums without hesitation’ are descriptions of executed behaviour, not of sentiment.
• East China’s procurement index up 0.04 with shipment down 0.01 is the correct directional pair: buyers turning active while sellers turn cautious is precisely the micro-mechanism of a narrowing discount.
• Central China remains the drag. A 70–90 discount with the procurement index flat at 2.9 says inland demand did not follow the coast, and the regional spread — roughly 145 to 205 yuan between South and Central China — is at the top of this cycle’s range.

7 · Key Price Drivers

Bullish factors

• ⚑ All three regions destocked, −10,500 mt on the day; SMM states plainly that ‘aluminum ingot inventory continued its destocking trend, providing bottom support for aluminum prices’.
• ⚑ This brief’s ‘inventory has turned’ call is falsified by the primary domestic series and withdrawn — the single most important bull fact in this edition.
• ⚑ South China transactions at a 75–115 premium over AL2609, with holders withholding, concessions vanishing and traders unable to source cheap lots.
• ⚑ East China’s discount narrowed to −20 to 0 with Wuxi destocking, consumption sentiment ‘improved significantly’ and the procurement index up 0.04.
• ⚑ A00 held a premium against the September contract for a second consecutive session (+15) while the paper completed a 107% retracement.
• ⚑ The LME contango collapsed from −$20.50 to −$1.00 — the forward fell $29.00 against the cash’s $9.50, leaving the front end relatively firm.
• ⚑ The dollar held below 99 for a second session (98.824) and failed to rally even as hike odds rose 4.7 points.
• ⚑ Brent is heading for a second consecutive weekly gain above 5%, with a fifth straight higher session overnight — positive on both the cost and risk channels.
• ⚑ Ex-China alumina rose to $363–364/mt FOB East Australia from $358 on August 13, widening the China-overseas spread to 384.55 yuan/mt.
• ⚑ Middle East transportation problems are lifting bagged-alumina demand, and tight Indonesian bauxite is capping local alumina output.
• ⚑ July scrap aluminium imports −25% y/y, a fourth consecutive monthly fall — a hard cost constraint under secondary alloy.
• ⚑ July bauxite imports −6.3% m/m, with Guinea −6.1% m/m and −6.7% y/y.
• ⚑ EGA’s H1 production −47% and sales −32%, with Al Taweelah not back to pre-incident levels until Q1 2027.
• ⚑ The UAE’s full suspension of trade with Iran remains in force; geopolitical risk in EGA’s home market is unresolved.
• ⚑ Total China alumina inventory −30,000 mt to 7.245 million mt, with port stocks −35,000 mt.
• ⚑ AD2610 was the only one of the three contracts to close higher (+5), the session after losing all six averages.
• ⚑ The ADC12 theoretical premium over AD2610 is still 955 yuan/mt — the physical has not followed the paper down.
• Japan’s three major ports at 201,000 mt, the lowest since April 2010 (carried).
• PV frame operating rates ticked up, with front-loaded exports adding marginal demand.
• July unwrought aluminium alloy exports +135.1% y/y; January–July +104.6% y/y.
• January–July aluminium semis exports +16.7% on the customs caliber.
• July liquid-aluminium ratio 78.3% with an August forecast of 78.5%, and casting-ingot output −15.1% y/y, continuing to suppress ingot formation (carried).
• Passive production cuts in southwest China continuing (carried).

Bearish factors

• ⚑ MA60 (23,607.17) is lost by 12.17; the price now sits beneath four of six averages.
• ⚑ The August advance is 107.0% retraced, with the close 45 BELOW the August 3 starting point — the whole move is erased.
• ⚑ 23,595 is the lowest main-contract close since July 29, and the twenty-session percentile falls from 44.0 to 36.7.
• ⚑ The day’s low of 23,525 is the lowest intraday low since August 3 and sits 44.00 below MA30.
• ⚑ SMM CUT both forecast bands: SHFE to 23,200–24,000 from 23,600–24,450, and LME to $3,150–3,250 from $3,180–3,330.
• ⚑ LME cash at $3,182.00 remains below all five averages, with the gap to MA40 widening from $0.19 to $10.94.
• ⚑ LME stocks unchanged for a third consecutive session (four identical prints) — the draw sequence has stopped.
• ⚑ The August 19 delivery test passed without a squeeze; the warrant-concentration thesis is uncorroborated and its data is stale.
• ⚑ September hike odds rose to 35.3% from 30.6%, October’s hold fell to 51.3%, and December implies 65.6% odds of at least one hike.
• ⚑ Jobless claims at 206,000 beat expectations, keeping the hawkish option alive.
• ⚑ China’s August LPR unchanged for a fifteenth month — no new monetary offset to fixed-asset investment at −6.7%.
• ⚑ Canada’s H1 exports to the US fell 25.03%, with only ~42% of the lost volume rehoused — confirmation that tariffs are net-contractionary for global trade flows.
• ⚑ EU CBAM aluminium-derivative defaults raised ~47.5% and applied retroactively to January 1, directly raising the cost of Chinese and third-country aluminium products into Europe.
• ⚑ SMM explicitly warns that export demand will weaken gradually as the price ratio recovers and orders on hand are digested.
• ⚑ The PV-frame uptick is front-loading ahead of US tariffs effective in December, implying a demand gap thereafter.
• ⚑ Cast aluminium alloy social inventory 28,100 mt, +2,500 w/w — a second consecutive week of buildup with the pace widening, ending a ten-week destock.
• ⚑ Secondary aluminium alloy ingot inventory +333 mt to 10,275 mt.
• ⚑ AO2610 is below all six averages for a third session, with Chinese spot still falling on oversupply.
• ⚑ The alumina operating rate was FLAT w/w at 74.33% with weekly output of 1.688 million mt — the surplus is not clearing through cuts.
• ⚑ Nanshan’s 250,000 mt/year Indonesian smelter is under construction — confirmed forward supply.
• July aluminium processing PMI 42.2% with all seven sub-sectors contracting; the August billet operating rate is forecast down to ~56.9% (carried).
• July passenger-vehicle retail −20.9% y/y; January–July fixed-asset investment −6.7%; new-home prices −3.2% y/y (carried).

8 · One-Sentence Market View

9 · Watchlist for Today’s Day and Night Sessions

• ⚑ MA60 at 23,607.17. It sits just 12.17 above the close and is the first level to reclaim; a close back above it in either session downgrades this break from confirmed to false. Failing that, the downside sequence is 23,569.00 (MA30, the only average still held, by 26.00) → 23,525 (the August 20 low) → 23,455 (the July 29 close) → 23,382.25 (MA40) → 23,200 (SMM’s new band floor). Upside: 23,630 (settlement) → 23,640 (the August 3 launch point) → 23,675 (the August 19 close) → 23,720 (the August 20 high) → 23,768.50 (MA20).
• ⚑ Whether the three-region daily draw continues, and what level the Thursday social print lands at. This edition can confirm the −10,500 mt direction but not the stock. If the weekly caliber shows a build, the daily and weekly series will conflict and the withdrawal announced in this edition will itself need re-examining. Watch whether billet inventory follows.
• ⚑ Whether the spot premium survives. The core question is whether South China’s 75–115 premium and East China’s narrowed −20 to 0 hold: if they persist or widen, ‘the physical is tightening’ upgrades from single-session behaviour to usable evidence; if they snap back, August 20’s firmness should be read as quotation lag (this is interpretation). Watch also whether Central China’s 70–90 discount narrows in sympathy.
• ⚑ Whether LME cash reclaims MA40 ($3,192.94) and whether the contango widens again. The relative firmness of the front end — cash −$9.50 against the forward’s −$29.00 — is the most important curve signal in this edition; a move back toward −$20 would void it. And after four identical stock prints, the direction of the next change is decisive.
• ⚑ Whether hike odds keep rising, and whether the dollar follows. The 35.3% was priced after full digestion of the hawkish minutes; if it climbs toward 40% while the dollar still refuses to rally, the currency channel has decoupled from the rate path and the macro drag on aluminium is weaker than it looks. If instead the dollar retakes 99, the macro bear case must be re-entered. Jackson Hole runs August 27–29 with Warsh speaking August 28.
• ⚑ Whether the alumina China-overseas spread (384.55 yuan/mt) keeps widening, and whether Chinese operating rates finally come down. A flat 74.33% means the surplus is not clearing. If ex-China keeps rising while China keeps falling, imported alumina exits the Chinese market and the domestic floor becomes a question of production cuts rather than imports. Watch also whether AO2610’s open interest stays above AL2610’s.
• ⚑ The trade-policy thread: whether the UAE’s suspension of Iran trade extends to third-party transshipment; whether Hormuz transits hold above 60 per fortnight; and whether Chinese offers into Europe adjust after the CBAM default increase. ⚑ This thread has replaced inventory as the most substantive bear source in this edition (this is interpretation).

Disclaimer: This brief is an industry information compilation and research reference. All figures are labeled with their source caliber, and confirmed data is separated from market interpretation throughout. It does not constitute investment advice, an offer, or a solicitation, and no responsibility is accepted for any trading decision. Futures and physical markets carry risk; readers should verify the data independently and form their own judgement. Items marked ⊘ denote conflicting calibers, secondary-source-only data, or data not retrievable at the time of writing.