On August 18, 2026, in the derivatives market, aluminum futures on the Shanghai Futures Exchange showed slight volatility. The most-traded aluminum contract for September delivery dropped by 0.19% by the end of Tuesday's daytime trading and decreased by 0.75% overnight, closing the nighttime session at Yuan 23,735/tonne as of 1 a.m. Wednesday, August 19, 2026.
Recent economic data continue to weigh on rate-hike expectations, yet tensions in the Hormuz Strait have escalated, with Middle East uncertainty rising sharply. According to news, Trump stated that the U.S. will not hold any talks with Iran and has no plans to do so in the future. He has instructed his team not to negotiate until Iran is ready to sign an agreement, and he labeled the Hormuz Strait as "U.S. territory," claiming full American control over the waterway, a claim Iran has dismissed as delusional. The window for U.S.–Iran rapprochement has effectively closed, and shipping traffic through the strait remains at minimal levels.
That said, the marginal impact of geopolitical risk on aluminum prices has notably softened compared with the initial outbreak of conflict. On the supportive side, softer U.S. employment and inflation data have cooled Fed rate-hike bets, providing a valuation floor for base metals. Meanwhile, previously curtailed aluminum capacity in the Middle East is unlikely to recover in the near term, LME aluminum inventories have fallen to historic lows with elevated canceled warrants, and elevated oil prices have pushed up freight and petroleum coke costs, collectively lifting the smelting cost curve and underpinning prices via both cost support and tight inventories.
On the other hand, the ramp-up of Middle Eastern smelters such as Emirates Global Aluminium has outpaced expectations, while domestic downstream operating rates have slipped amid August's seasonal processing lull. Traders' inventories remain above year-ago levels, U.S. long-end Treasury yields have surged, and the Hormuz Strait narrative has already been partially priced in, factors that collectively cap further upside for aluminum prices.
On August 18, 2026, Mysteel's daily price assessment showed that the market price for A00 aluminum with a minimum purity of 99.7% in China was Yuan 23,900/tonne, down Yuan 170/tonne from the previous day; in South China Yuan 24,030/tonne, down Yuan 90/tonne from the previous day; and in Central Plains Yuan 23,800/tonne, down Yuan 170/tonne from the previous day.
Macro sentiment has retreated, and with expectations of a restart at EGA and Alba being pulled forward into positioning, SHFE aluminum has reversed from gains to losses. On the supply side, domestic smelter operations remain steady, with run capacity reaching 45.37 million tonnes in July 2026, running modestly above nameplate levels. Downstream, fabricators remain entrenched in the traditional off-season; however, the rising molten aluminum ratio has suppressed ingot casting, keeping traders' inventories on a draw even amid tepid demand.
In yesterday's early session, SHFE aluminum edged lower, with traders' inventories in the Central Plains market easing to around 160,000 tonne. The spot-to-futures basis widened, while sellers maintained steady offer rhythms, leaving available tonnage relatively tight. As prices softened, downstream consumers stepped in on dips, and traders returned to cover shorts and fulfill term requirements on a needs basis; overall turnover remained modest.
In South China, with the cross-month long-only delivery window approaching, traders actively lifted metal to meet term commitments, significantly lifting the local basis and improving overall trading activity.
Overall, the July U.S. CPI and PPI prints landed soft, trimming market expectations of a September Fed rate hike. Meanwhile, the U.S. and Iran remain deeply divided over the reopening of the Strait of Hormuz and war-damage reparations, leaving the standoff in a state of protracted tug-of-war. Persistent Middle East geopolitical risk premium continues to underpin aluminum prices.
