China Aluminum Prices Rise on Tight Supply
A00 ingot prices climbed over three percent in August as limited new capacity and low inventories supported the market.
Chinese primary aluminum prices extended their upward trend through August, driven by persistent supply constraints and a gradual recovery in downstream demand. The monthly average price for A00 ingots in East China reached RMB 23,869 per tonne, marking a 3.34 percent increase compared to July. This price appreciation reflects a structural shift in the market, where rigid production limits are outweighing temporary macroeconomic volatility.
Market dynamics in August were characterized by financial sentiment driving short-term fluctuations, while physical fundamentals anchored the long-term price center. Low spot inventories and high molten aluminum ratios provided a firm floor for prices, particularly as the market transitioned into the traditional peak-season demand period. The combination of limited incremental supply and steady destocking created a favorable environment for price stability at higher levels.
Production Output Remains Constrained
Primary aluminum output in China stood at 3.88 million tonnes in August, a 2.41 percent year-on-year increase. However, the average daily production rate of 125,100 tonnes remained nearly flat month-on-month, indicating that new supply growth is stagnant. Domestic operating capacity has reached a plateau, with future increments dependent primarily on the commissioning of replacement capacity and technical renovation projects rather than new plant construction.
The supply side is further characterized by a widening spread between primary aluminum and scrap. The average spread reached RMB 867 per tonne in August, up RMB 262 from the previous month. This divergence occurred as rising primary prices encouraged scrap traders to sell, increasing scrap supply, while downstream processors remained cautious. The result is a market where scrap prices lag significantly behind primary metal, highlighting the premium attached to newly produced ingots.
Demand Recovery Shows Sectoral Divergence
Downstream demand in August displayed a mixed picture, with weekly average output of semi-finished products holding steady at 611,600 tonnes. The extrusion sector faced headwinds from high temperatures, weak construction demand, and elevated input costs, leading to cautious operating rates and pressured processing fees. Conversely, the battery aluminum foil segment demonstrated strong resilience, maintaining robust order flow despite the broader off-season environment.
Aluminum rod production initially benefited from a surge in export orders, but this momentum faded as outstanding orders were delivered and new inflows slowed. Similarly, cast-rolled coil and slab output edged lower, with market activity driven largely by long-term contracts rather than new spot purchases. This pattern suggests that while core demand remains resilient, the pace of consumption is moderating in price-sensitive segments.
September Outlook Supported by Fundamentals
Looking ahead, the aluminum market is positioned for continued support into September. The core drivers of supply tightness and inventory reduction remain intact, providing a solid basis for price maintenance. As the market approaches the peak consumption period, the balance between limited supply and recovering demand is expected to sustain the upward price trend.
While macroeconomic factors may continue to cause short-term volatility, the underlying physical market structure favors higher valuations. The absence of significant new supply and the steady digestion of inventories suggest that the price center will remain elevated. Market participants should focus on the pace of demand recovery and the pace of scrap supply adjustments as key indicators for the coming month.
