Aluminium Prices Climb as Supply Tightens, US Tariffs Loom

Key Highlights

• Aluminium Prices Rise: LME opened at $2,699/MT today, while MCX opened at Rs 264.35/kg, following a 1.21% increase in the previous session.
• US Tariffs Impact: The anticipated 25% US import tariff on aluminium, effective March 12, has driven physical market premiums to record levels.
• Global Deficit Predicted: JPMorgan forecasts a 600,000 mt aluminium deficit by 2025 due to slower supply growth and China’s production cap.
• Japan Faces Higher Premiums: Aluminium producers are demanding $245-$260/MT for Japanese shipments, marking a 7%-14% increase for Q2.
• Market Outlook: Aluminium has support at Rs 262.8, with resistance at Rs 265.3. A breakout could push prices higher, while downward pressure remains from Chinese production.

Aluminium Price:

• As of last day, LME opened at $2664.5 /mt and closed at $2703 /mt. Today LME opened at $2699/mt.
• As of last day, SHFE opened at 20,865 Yuan/MT and closed at 20,915 Yuan/MT. As of today SHFE opened at 20,900 Yuan/MT.
• As of last day, MCX closed at Rs 264.40/Kg. Today, the market opened at Rs 264.35/Kg.

Aluminium Demand & Supply

• Aluminium prices increased by 1.21%, closing at 264.4, driven by U.S. import tariffs and tightening supply conditions. The anticipated reintroduction of a 25% tariff on aluminium imports by U.S. President Donald Trump, effective March 12, has pushed premiums in the physical market to record levels. JP Morgan predicts a significant tightening in the global aluminium market, forecasting a deficit of over 600,000 mt by 2025, largely due to slower supply growth, especially in China. Despite this forecast, China produced a record 44 million mt of aluminium in 2024.
• However, production is expected to slow substantially as Beijing enforces its 2017 production cap of 25 million tons to reduce excess supply and meet carbon emission targets. The resumption of production in China is also putting some pressure on prices, with domestic operating capacity anticipated to increase in February. According to the International Aluminium Institute (IAI), global primary aluminium output rose by 2.7% year-on-year to 6.252 million tons in January. Additionally, China’s exports of unwrought aluminium and aluminium products grew by 17% year-on-year in the first ten months of 2024, reaching almost 5.5 million tons.

Aluminium News

Global aluminium producers have requested premiums ranging from $245 to $260 per mt from Japanese buyers for primary metal shipments for the April-June period. This represents a 7%-14% increase compared to the current quarter, according to four sources involved in the pricing discussions. Japan, a key importer of aluminium in Asia, sets the regional benchmark for premiums based on the additional amount it agrees to pay over the London Metal Exchange's cash price.

Expert Opinion

The market is currently seeing short covering, as open interest dropped by 4.29% to 3,146 contracts, while prices increased by 3.15 rupees. Aluminium has support at 262.8, with the potential for further decline to 261.2. Resistance is at 265.3, and a breakout above this level could drive prices up to 266.2.