Aluminium Prices Hold Highs as Chinese Stockpiles Drop 55,000 Tonnes
SHFE and LME aluminium consolidate near peaks while destocking accelerates in China ahead of holidays.
Key points
- China's aluminium ingot social inventory fell by 55,000 tonnes over the past week.
- SHFE aluminium closed at 24,375 RMB per tonne, maintaining a bullish medium-term structure.
- US sanctions expansion against Russia and Iran adds geopolitical risk to global markets.
Aluminium futures on the Shanghai Futures Exchange and London Metal Exchange have stabilized at elevated levels, with SHFE contracts closing at 24,375 RMB per tonne and LME prices at 3,293.5 USD. Despite minor daily fluctuations, both markets maintain a medium-term bullish structure, supported by tight supply dynamics and persistent inventory drawdowns in key production hubs.
The consolidation reflects a balance between geopolitical risk premiums and downstream purchasing caution. While macro tensions involving the US, Russia, and Iran heighten uncertainty, the physical market is driven by specific supply chain disruptions. China’s inventory levels have declined significantly, signaling that the destocking cycle remains the primary force shaping near-term price behavior.
Inventory drawdown signals tight supply
According to AL Circle, China’s social inventory for aluminium ingots fell by 12,000 tonnes from last Thursday to this Monday, marking a cumulative drop of 55,000 tonnes over the past week. This accelerated destocking is attributed to disrupted shipments from Xinjiang and increased stockpiling by downstream sectors ahead of upcoming holidays. The reduction in available stock has reinforced price support, even as trading volumes remain moderate.
On the supply side, domestic production in China has remained stable, with weekly output showing no significant changes. However, the proportion of liquid aluminium in transactions has edged down by 0.02 percentage points, indicating a shift in product demand. Internationally, Alba’s operating capacity has recovered to approximately 1.3 million tonnes, slightly easing global supply constraints but insufficient to offset the tightening in Chinese markets.
Geopolitical risks weigh on sentiment
Macroeconomic factors continue to influence market psychology, with the US signing the Lindsey Graham Sanctioning Russia and Iran Act of 2026. This legislation expands statutory sanctions and tariffs against Russia and extends restrictions on Iran. President Trump indicated the US is at a decision stage regarding Iran, with options ranging from diplomatic deals to severe economic or military actions. Such developments introduce volatility risks that could disrupt global trade flows and energy costs, indirectly impacting aluminium production and logistics.
Downstream demand shows mixed signals
Downstream activity in central China has been sluggish, with high prices suppressing purchasing sentiment among processing enterprises. While some buyers are stockpiling ahead of holidays, others continue to negotiate for lower premiums, creating a divergent market. SMM A00 aluminium ingot spot transactions last Friday ranged from parity to a premium of 20 RMB per tonne, reflecting the tension between supply tightness and demand resistance. Large suppliers are delivering long-term contracts early to avoid low premiums, further complicating spot market dynamics.
