Mysteel's price assessment showed that China's aluminum prices demonstrated a clear recovery trend entering July 2026. On one hand, the previous oversold conditions provided technical momentum for a rebound; on the other, fundamentals offered robust support. During the price correction phase, the destocking of aluminum ingots accelerated markedly, as downstream enterprises actively replenished inventories at lower levels. This concentrated release of demand effectively neutralized downward price pressures, jointly driving the stabilization and rebound of aluminum prices throughout July.
On the supply side, Mysteel's full-sample survey of Chinese primary aluminum producers indicates that China's primary aluminum production in July 2026 came in at 3,878,700 tonnes, representing a year-on-year increase of 2.79% and a month-on-month rise of 3.47%. The average daily output for July was 125,100 tonnes, a marginal month-on-month increase of 100 tonnes based on 31 production days. In July, the operating capacity expanded slightly. The commissioning of new capacity and the resumption of idled lines in Northwest and North China have largely concluded, while production in other regions remained stable with limited fluctuations.
With regard to scrap supply, the average spread between primary aluminum and aluminum scrap in July was Yuan 504/tonne, widening by Yuan 22/tonne from June, per Mysteel assessment. Despite the consumption off-season weighing on overall downstream demand, the earlier sharp price drop prompted scrap traders to become increasingly reluctant to sell, leading to temporary tightness in scrap supply. As aluminum prices rebounded from lows in July, scrap prices followed with a modest increase. Market circulation improved, and traders showed greater willingness to sell at higher prices. Downstream enterprises primarily adhered to just-in-time procurement strategies, though some firms with depleted inventories and tight supply actively sourced material at firm prices to ensure deliveries.
In terms of demand, domestic production of primary aluminum semis maintained a steady growth trajectory in July. Mysteel data reveals that the weekly average output of aluminum billets increased by 1.05% month-on-month, while inventories continued to draw down, with finished goods stocks at billet plants falling by 0.72% month-on-month by the end of July.
Yet, performance varied across semis segments. Aluminum bar production remained elevated with a slight month-on-month increase amid alternating plant maintenance and restarts. However, downstream profile makers were hampered by high temperatures, leading to temporary production cuts at some smaller enterprises; consequently, weak end-market demand exerted downward pressure on aluminum bar processing fees.
Aluminum rod output continued to climb due to the ramp-up of new production lines and the scheduling of existing backlogs, despite the narrowing export margins cooling new export orders.
The cast-rolled coil and slab sector operated stably, though divergence between enterprises persisted; smaller players curtailed output due to insufficient orders and cost pressures, whereas large enterprises leveraged customer resources and cost advantages to maintain high operating rates and superior sales performance.
Examining the end-market demand structure, a clear divergence remained evident, characterized by a mild recovery in traditional sectors and sustained strength in emerging fields.
Demand for architectural profiles declined sharply amid sluggish real estate starts and low construction site activity caused by extreme heat, acting as the primary drag on traditional sectors.
Conversely, the automotive and lightweighting segment maintained robust growth; the rising penetration rate of electric vehicles drove a steady increase in aluminum usage per vehicle, keeping orders for automotive aluminum products stable and ample.
The photovoltaic sector benefited from the gradual ramp-up of domestic utility-scale projects, lifting module manufacturers' operating rates, while energy storage continued to lead demand growth with strong performance in battery foil demand.
Exports of aluminum materials and products remained resilient, supported by existing order backlogs.
In summary, despite the headwinds from traditional sectors during the off-season and a weak property market, demand held up relatively well, supported by resilient consumption from emerging sectors including automotive lightweighting, photovoltaics, and energy storage, coupled with sustained export growth.
Domestic aluminum destocking accelerated in July. According to Mysteel, as of July 30, the traders' inventory of aluminum stood at 931,000 tonnes, down 229,000 tonnes month-on-month. Regarding supply structure, the proportion of molten aluminum directly supplied to fabricators continued to rise, reaching 77.92% in July, up 2.37 percentage points month-on-month. This significant increase in molten aluminum usage led to a sharp reduction in the volume of cast ingots, thereby curtailing inbound shipments to traders. Although outbound shipments decreased month-on-month, they remained elevated year-on-year, sustaining the destocking trend.
Meanwhile, aluminium smelters' in-plant aluminum inventories increased by 15,000 tonnes month-on-month to 70,000 tonnes. For aluminum bars, traders' inventories fell by 9,000 tonnes month-on-month to 127,000 tonnes, also hovering at historically low levels. However, the off-season and high temperature affected profile plants' operating rates, weakening downstream processing demand and constraining further destocking of aluminum bars.
Also, by the end of July 2026, SHFE aluminum ingot warrants had fallen by 118,700 tonnes from the end of June to 320,200 tonnes. Based on Mysteel's comprehensive analysis of July's primary aluminum supply, demand, and changes in trader and producer inventories of aluminum ingots and bars, a theoretical supply gap of approximately 244,000 tonnes is estimated for the month.
Looking ahead to August, the fundamental support for aluminum prices is set to strengthen further, complemented by improving macro sentiment, pointing to a continued upward price trajectory. On the macro front, market expectations for a Federal Reserve rate hike in September are cooling, weakening the US dollar and buoying base metals like copper and aluminum. However, attention should be paid to potential volatility surrounding key data releases such as CPI and PPI, as well as recurring geopolitical tensions in the Middle East.
On the supply side, domestic operating capacity for aluminum is nearing its peak, leaving limited room for further increases. Regarding demand, while traditional architectural profiles remain mired in the off-season with weakening operating rates, structural growth drivers including EV lightweighting, accelerating grid investment, energy storage installations, and resilient export chains are expected to sustain overall demand levels, preventing the typical seasonal slump.
In terms of inventory, the high molten aluminum ratio is expected to persist in August, suppressing ingot casting and sustaining the destocking trend. Coupled with LME inventories hitting fresh four-year lows, the global low-inventory landscape provides a solid price floor.
In summary, aluminum prices in August are expected to fluctuate with a bullish bias, with the price center shifting higher compared to July. The SHFE primary aluminum contract is projected to trade within a range of Yuan 23,500/tonne to Yuan 24,500/tonne, with key variables to monitor including the pace of inventory drawdowns.
Written by Regina WANG
wangjiaqie@mysteel.com
