The risk of stagflation in overseas markets is looming. The Federal Reserve maintains a cautious policy, and the expectation of two interest rate cuts within the year remains unchanged. Domestic policies have been continuously implemented to support the economy. The record high growth rate of retail sales indicates marginal improvement in consumption. However, the deep decline in real estate investment remains the core drag. The suspension of tariffs has temporarily boosted sentiment, but exports remain under pressure in the medium and long term. On the supply side, electrolytic aluminum maintains high and stable production, with continuous capacity release, and the low pattern of aluminum ingot social inventory persists. However, the emergence of export pressure, coupled with the initial signs of accumulation in aluminum bar inventories and the approaching off-season, has raised expectations for the accumulation of aluminum ingots. The demand side shows significant differentiation: The sluggish real estate chain suppresses the demand for building aluminum materials, while the high growth in production and sales of new energy vehicles and the policy of trading in old vehicles for new ones strongly support emerging fields such as aluminum plates, strips and foils. In the future market, the off-season's suppression of traditional consumption and the sluggishness of the real estate sector, coupled with the expectation of an excess of alumina, will intensify the risk of cost loosening, which will restrict aluminum prices. However, low inventories and the intensification of domestic policies to stabilize growth jointly build the resilience at the bottom. It is expected that Shanghai aluminum will maintain a range-bound fluctuation, and the price center may shift downward compared with June.
I. Trends of Futures and Spot Prices
(1) Trends of aluminum prices at home and abroad
Recently, both domestic and international aluminum prices have been experiencing strong fluctuations. Lme Aluminum 3M Electronics opened at $2,454 per ton at the beginning of the month, with a low of $2,425.5 per ton and a high of $2,560.5 per ton. It rose by $107.5 per ton within the month, an increase of 4.38%. The main domestic contract for Shanghai aluminum opened at 20,115 yuan per ton at the beginning of the month, with a low of 19,845 yuan per ton and a high of 20,745 yuan per ton. It rose by 350 yuan per ton within the month, an increase of 1.74%. (See Figures 1-1 and 1-2)
(II) Basis structure of the internal and external discs
Recently, the near-month contract of Shanghai Aluminum has been supported by extremely low inventories and high premiums in the spot market. Coupled with the capital game triggered by the geopolitical conflict pushing up energy costs and the expectation of the Federal Reserve cutting interest rates, the risk of crowded positions has driven a strong upward trend in the near-month contract. The far-month contract is under pressure due to weak demand during the off-season, the decline in cost support caused by an excess of alumina, and the suppression of long-term exports by the US tariffs. Market expectations of the start of the inventory accumulation cycle in July and August have strengthened the pessimism about the far-month. The interperiod price spread of Shanghai aluminum shows a BACK structure and keeps rising. The fluctuation ranges of the current month's contract and the consecutive one, two and three contracts are 70 to 230 yuan, 110 to 380 yuan and 160 to 490 yuan per ton respectively. The premium and discount prices of LME spot prices have been fluctuating around the flat level throughout the month, reaching a high of $7.37 per ton and a low of -$7.71 per ton. (See Figures 1-3 and 1-4)
Recently, China's electrolytic aluminum has maintained a "high and stable production" operation. On the demand side, although the state has continuously boosted the real estate market through policy, the real estate data remains weak. However, the strong operation of the passenger car market has provided support for aluminum prices. The spot price of electrolytic aluminum is basically at a premium state.
Ii. Fundamentals
(1) Bauxite market
After entering June, the price of domestic bauxite in China rose slightly. After a slight increase, it remained stagnant again. Currently, the market quote is 508 yuan per ton. The arrival of the rainy season will have an impact on the mining and transportation of mines. Coupled with the tightened environmental protection inspections in northern regions, the price of bauxite in Henan Province was the first to rise. Subsequently, the price of domestic bauxite remained stagnant again. (See 2-1
In terms of imported ores, there have been no many overseas reports recently. However, the situation of bauxite mining enterprises being affected by the revocation of mining licenses and exploration licenses by the transitional government of Guinea in the early stage has not been alleviated. Coupled with the gradual manifestation of the impact of the rainy season, the shipment of ores has been tightened to some extent. The CIF price of bauxite in Australia is quoted at 76 US dollars per ton, up 3 US dollars per ton compared with the previous period. The CIF price of bauxite from Guinea was quoted at 72 US dollars per ton, remaining unchanged compared with the previous period. This month, the freight rates for Capesize bulk vessels in Guinea and Australia have started to rise. The freight rate range for transporting Guinea ore to northern Chinese ports is [22-28.5] US dollars per ton, and that for transporting Australian ore to northern Chinese ports is [9.5-12] US dollars per ton. (See 2-2
(II) Alumina Market
As the profits of alumina smelting have been well restored, more and more enterprises have resumed production. Affected by supply expectations, the futures and spot prices of domestic alumina have continued to decline. With the continuous strengthening of support from the production end, the futures and spot prices of alumina have begun to fluctuate and bottom out. The regional basis of alumina has quickly dropped back to the normal level after a short-term surge.
Recently, the trading atmosphere of alumina in overseas markets has been poor, and the price of alumina in Australia has been fluctuating continuously. As of July 2nd, the average FOB price of alumina in Australia was 356 US dollars per ton, a decrease of 5 US dollars per ton compared with the previous period. The quoted ocean freight rate from western Australian ports to northern Chinese ports was 27 US dollars per ton, an increase of 1 US dollar per ton compared with the previous period. Calculated based on the spot price of RMB at northern Chinese ports, it was around 3,230 to 3,240 yuan per ton.
(3) Cost of electrolytic aluminum
The average theoretical full cost per ton of aluminum this month was 18,374.51 yuan per ton, and the average profit per ton of aluminum was 3,476 yuan per ton. (See Figure 2-3
(4) Inventory and Consumption
Aluminum inventory: According to MyNonferrous Metals Network, as of July 3, 2025, the social inventory of aluminum ingots was 456,000 tons. The inventory of aluminium rods is 163,000 tons. (See Figures 2-4 and 2-5
According to my data on nonferrous metals, in May 2025, the operating rate of aluminum plate and strip enterprises across the country was 73.00%, with a month-on-month decrease of 0.60% and a year-on-year decrease of 3.68%. The operating rate of aluminum rod and wire enterprises across the country was 63%, 1.0% compared with the previous period and 8.1% compared with the same period last year. The operating rate of aluminum foil enterprises across the country was 72.12%, -3.65% month-on-month and -1.25% year-on-year. The operating rate of primary aluminum-based aluminum alloy ingot enterprises across the country was 41.32%, -4.53% compared with the previous period and 10.58% compared with the same period last year. The capacity utilization rate of national recycled aluminum alloy ingot enterprises was 38.04%, 2.37% compared with the previous period and -5.14% compared with the same period last year.
According to the production and sales data released by the China Association of Automobile Manufacturers, in May 2025, China's auto production and sales reached 2.649 million and 2.686 million units respectively. Month-on-month, they increased by 1.1% and 3.7% respectively, and year-on-year, they increased by 11.6% and 11.2% respectively. From January to May, the production and sales of automobiles reached 12.826 million and 12.748 million units respectively, increasing by 12.7% and 10.9% year-on-year. In May, the production and sales of passenger vehicles reached 2.313 million and 2.352 million units respectively, increasing by 12.8% and 13.3% year-on-year. From January to May, the production and sales of passenger vehicles reached 11.08 million and 10.996 million units respectively, increasing by 14.1% and 12.6% year-on-year. In terms of new energy vehicles, production and sales reached 1.27 million and 1.307 million units respectively in May, increasing by 35% and 36.9% year-on-year. The sales of new energy vehicles accounted for 48.7% of the total sales of new vehicles. From January to May, the production and sales of new energy vehicles reached 5.699 million and 5.608 million units respectively, increasing by 45.2% and 44% year-on-year. The policy of trading in old cars for new ones has continued to take effect, and the vitality of domestic consumption has been accelerated to be released. Coupled with the frequent launch of new products by enterprises and the vigorous promotion activities at many auto shows, the passenger car market has maintained a good trend. (See Figures 2-7 and 2-8
Iii. Outlook for the Future Market
The risk of stagflation in overseas markets is looming. This month, the Federal Reserve kept interest rates unchanged but hinted at two rate cuts within the year. Weak economic data and employment resilience coexist in the United States, and the policy is cautiously observing. Domestic policies have been continuously implemented, with interest rate cuts and measures to stabilize growth being used to support the economy. Multiple high-frequency data indicate marginal improvement in the consumption end, but the deep decline in real estate investment remains the core drag. The suspension of the tariff war has temporarily boosted market sentiment, but exports remain suppressed in the medium and long term.
On the supply side, electrolytic aluminum has maintained high and stable production. With the resumption of production in Yunnan, Guangxi and other places and the release of production capacity, the weekly output of electrolytic aluminum has continued to increase this month. At present, the low inventory pattern of aluminum ingots in the social inventory continues. However, due to the impact of tariffs, the export pressure is gradually emerging. In addition, the social inventory of aluminum bars has begun to show signs of accumulation this month. Coupled with the approaching off-season, the expected accumulation of aluminum ingots is heating up.
At the consumer end, a pattern of differentiation has emerged between the terminal consumption sector and emerging sectors: Due to the continuous sluggishness of the real estate chain, the demand for architectural aluminum profiles and aluminum alloys has been weak. The high growth in production and sales of new energy vehicles has driven up the operating rates of aluminum plates, strips and foils. The policy of trading in old cars for new ones has stimulated a significant year-on-year increase in the sales of passenger vehicles.
Outlook for the future market: The arrival of the off-season will curb traditional consumption, and the sluggishness of the real estate sector remains unresolved. The expectation of an excess of alumina has intensified the risk of loosening in the cost side of electrolytic aluminum. Meanwhile, the low inventory of aluminum ingots in the social warehouse and the continuous strengthening of domestic policies to stabilize growth have jointly contributed to the resilience of the bottom of Shanghai aluminum. Overall, Shanghai aluminum is likely to maintain a range-bound fluctuation, but the price center has slightly declined compared to June.
Master of Laws. Since entering the futures industry in 2019, I have been deeply engaged in the research of energy and chemical industry, as well as non-ferrous metal bulk commodities. Relying on the macro-industry dual-dimensional analysis framework, the system deconstructs the supply and demand pattern, inventory cycle and policy orientation of the industrial chain, providing trend prediction, hedging and risk management strategies for institutional clients and real enterprises.
