Aluminum prices rose in July

In July 2026, domestic aluminum ingot prices halted their decline and rebounded. According to the SunSirs commodity market analysis system, as of July 30, 2026, the average market price of aluminum ingots in East China stood at 23,643.33 RMB/ton, marking a 6.17% increase from the average price of 22,270 RMB/ton recorded on July 1.

The rise in aluminum prices in July was driven by a confluence of factors: a market floor was established through a rebound from oversold levels following earlier sharp declines; expectations of a marginal improvement in overseas macro liquidity provided upward momentum; supply-side rigidity in electrolytic aluminum—limiting capacity expansion—combined with low overall market inventories to offer solid support; and downstream enterprises restocking at lower price points aligned with spot market demand. These factors kept industry fundamentals tight, effectively limiting the scope for any market pullback.

Reasons for the rebound and upward trend in aluminum prices in July:

1. Macro-level capital tailwinds:

Weaker US economic data led to cooling interest rate hike expectations and a pullback in the US dollar. US CPI and non-farm payroll figures for July fell short of market expectations, causing a sharp downward revision in the probability of Federal Reserve rate hikes; consequently, US Treasury real yields declined and the US Dollar Index weakened. As aluminum is priced in US dollars, LME aluminum led a valuation recovery, driving a simultaneous rally in SHFE aluminum. Capital shifted from fixed-income assets to commodities, sparking a broad recovery in the non-ferrous metals sector, with aluminum attracting capital allocation at low price levels.

Deep overselling in June, followed by concentrated short covering and the entry of bargain-hunting capital. At the end of June, the dissipation of geopolitical risk premiums combined with rate-hike panic triggered heavy selling, resulting in severe overselling and an accumulation of short positions. In early July, mass short covering and industrial capital entering the market to restock and go long at low levels fueled an initial technical rebound.

Sector-specific positive news boosted market sentiment. Aluminum Corporation of China (Chinalco) announced a share buyback plan worth RMB 1–2 billion; coupled with significant profit growth reported in the semi-annual results of major electrolytic aluminum producers, the aluminum sector underwent a valuation recovery, amplifying the upward momentum.

2. Rigid fundamental support:

Domestic supply lacks elasticity for growth. Domestic electrolytic aluminum production is constrained by a "red line" cap of 45 million tonnes of permanent capacity; the industry's operating rate is currently near 98%, meaning operating capacity is essentially maxed out with no new capacity coming online. The proportion of molten aluminum supplied directly to downstream users continues to rise, reducing the volume of aluminum ingots circulating in the market. Furthermore, with expectations of stricter energy consumption controls across various regions during the summer, the market anticipates potential production cuts, keeping supply tight and inelastic.

Overseas supply remains structurally tight. The Middle East accounts for approximately 9% of global electrolytic aluminum capacity; the restart of capacity previously lost due to geopolitical conflicts has been sluggish, as restarting smelters takes months, making it impossible to bridge the supply gap in the short term—while geopolitical risks continue to provide a price premium. Electricity prices in Europe remain persistently high, forcing local smelters to maintain ongoing production cuts. Progress on commissioning and ramping up new overseas capacity has been slow, resulting in very limited growth in global supply. LME aluminum inventories have fallen to a near four-year low, with Russian aluminum accounting for over 90% of warrant holdings; due to sanctions, its circulation is restricted, creating a scarcity of truly deliverable spot metal and providing continued price support in overseas spot markets.

3. Counter-seasonal inventory drawdown during the off-season, Strengthening spot market fundamentals:

July is traditionally an off-season for aluminum consumption; however, domestic social inventories of electrolytic aluminum have continued to decline steadily, defying the usual seasonal pattern of accumulation and resulting in tight spot supply. Concurrently, SHFE inventories have fallen and spot premiums have risen, providing solid support for the market floor and preventing prices from weakening further.

4. Demand resilience exceeded expectations; downstream restocking at low price levels provided a floor:

While the market for traditional construction profiles has weakened due to the off-season, steady demand from the photovoltaic, new energy vehicle (lightweighting), and UHV grid sectors has offset the sluggishness in traditional consumption. Aluminum export figures remain high, with overseas orders providing a foundation for external demand; following a sharp drop in aluminum prices, downstream processing plants have engaged in concentrated "buy-the-dip" restocking, leading to increased spot market activity and a recovery in trading volumes.

Market Outlook

Overall, after a period of bottoming out lasting several days, the melamine market successfully broke through this weekend, significantly boosting market confidence in the short term. Driven by essential demand and market sentiment, melamine prices are expected to maintain a pattern of fluctuating with a firm undertone; moving forward, it will be important to monitor the follow-through of downstream demand and changes in plant operating rates.

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