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Shanghai Aluminum’s supply and demand fundamentals are weakening, with aluminum prices expected to fall on July 5th.

Amid the tug-of-war between the US rate cut expectations and demand concerns, LME aluminum dropped 0.88% overnight; Shanghai aluminum’s supply and demand fundamentals are weakening, with spot consumption cautious and lacking in orders. Aluminum ingot social inventories continue to accumulate, suggesting a potential drop in aluminum prices today.

The tug-of-war between US rate cut expectations and demand concerns continues, indicating that market risk appetite remains variable. Additionally, due to the US Independence Day holiday yesterday, trading was quiet, providing little new information. Overnight, LME aluminum fell from its peak, closing in the red, with the latest closing price at $2,527/ton, down $23, a drop of 0.88%. The trading volume decreased by 6,620 contracts to 8,395, and the open interest decreased by 5,219 contracts to 632,965. In the evening, Shanghai aluminum encountered resistance and turned downward, closing lower. The latest closing price of the main month contract 2408 was 20,395 yuan/ton, down 80 yuan, a decrease of 0.39%.

On July 4th, the latest inventory of LME aluminum was reported at 1,004,825 tons, a decrease of 5,000 tons from the previous trading day, down 0.50%.

On July 4th, spot aluminum prices were reported as follows: Changjiang Nonferrous Metals Market A00 aluminum ingot price was 20,375 yuan/ton, up 90 yuan; China Aluminum East China A00 aluminum ingot price was 20,380 yuan/ton, up 90 yuan. The fundamentals of Shanghai aluminum supply and demand are weakening, with aluminum plants in Yunnan actively resuming production since March, driving the continuous increase in national electrolytic aluminum operating capacity. However, the resumption of production is nearing its end, and the growth rate of capacity will significantly decrease after entering July. Coupled with the off-season for consumption, the demand for downstream aluminum products will become increasingly weak, with the operating rate of processing enterprises steadily declining and market consumption momentum evidently insufficient. Additionally, spot consumption is cautious and lacking in orders, hindering social inventory reduction and leading to continued accumulation of aluminum ingot social inventories, putting short-term prices under pressure. Meanwhile, the Fed’s rate cut expectations are uncertain due to the complexity of US economic data. Although overall economic data is weak, persistent inflation has led to divisions within the Fed. The market is closely watching the non-farm payroll report to be released on Friday evening for clearer guidance on future interest rate policies. In summary, under the current conditions of supply and demand imbalance, weak demand, and uncertainty in Fed policy, Shanghai aluminum prices are expected to continue to face downward pressure today.

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