Aluminum Prices Drop Slightly as Global Production Rises, Market Faces Trade Uncertainty

Key Takeaways

• Aluminum Prices Drop Slightly: LME aluminum prices opened lower as global production rises, particularly in China, while domestic market prices show minor fluctuations.
• Increasing Global Supply: Aluminum production grew 3% YoY in December, with China’s total output reaching 44.01 million metric tons in 2024, a 4.6% increase.
• Russian Aluminum Stockpile Growth: Russian aluminum stocks in LME warehouses rose to 67% of total stocks in January, raising concerns about market balance.
• Trade Uncertainty Persists: Japan and Australia are pushing for exemptions from upcoming US tariffs, while the EU is considering phasing out Russian aluminum imports.
• Technical Market Trends: Aluminum is currently seeing long liquidation, with key support at Rs 255.8 and resistance at Rs 261. A break above could push prices to Rs 264.2.

Aluminum Price:

• As of last day, LME opened at $2635.5 /MT & closed at $2626 /MT. Today LME opened at $2624/ MT.
• As of last day, SHFE opened at 20,530 Yuan/MT and closed at 20,585 Yuan/MT. As of today, SHFE opened at 20,560 Yuan/MT.
• As of last day, MCX closed at Rs 257.65/Kg. Today the market opened at Rs 257.95/Kg.

Aluminum Demand & Supply

• Aluminum prices dropped by 0.98% to $257.65, primarily due to the gradual resumption of production in China. Domestic aluminum production is expected to increase slowly in February, with January's output rising 3.8% year-on-year, but falling 0.3% month-on-month. While most smelters kept production steady, Shanxi reduced output by 20,000 mt/year. Russian aluminum stocks in LME warehouses grew to 67% of total available stocks in January, up from 56% in December, while Indian-origin stocks decreased. The EU's proposal to phase out Russian aluminum imports over the next year has raised concerns in the market.
• On the supply side, global primary aluminum production in December increased 3% year-on-year to 6.236 million mt, according to IAI data. Japan’s aluminum stocks at major ports rose 13.2% month-on-month to 323,600 metric tons by December’s end. China's aluminum exports grew 17% year-on-year in the first ten months of 2024, reaching 5.5 million mt. Despite higher production, Chinese smelters faced profitability issues, with an average loss of 687 yuan per mt, marking the first negative margin in three years. China's total aluminum output for 2024 reached 44.01 million metric tons, a 4.6% increase year-on-year.

Aluminum News

• Japan and Australia are requesting the U.S. to exclude them from the upcoming tariffs on imported steel and aluminum, which President Trump is set to reinstate next month for allied countries. Japanese Trade Minister Yoji Muto confirmed the exemption request on Wednesday, while Australian Prime Minister Anthony Albanese stated that he had made the request during a call with Trump, which is reportedly being carefully considered. Earlier this week, Trump announced that no exceptions would be allowed for the 2018 tariffs on steel and aluminum.

Expert Opinion

• Following the release of January CPI data that exceeded expectations, the US dollar index briefly increased but ultimately closed up 0.05%. The potential signing of a reciprocal tariff executive order by Trump, along with intensified EU sanctions and US tariffs, is expected to lead to short-term structural adjustments in the global aluminum market. Ongoing attention is needed on changes in US-EU trade policies and consumer demand trends. On the supply side, aluminum production is facing renewed pressure due to the resumption of production, with domestic operating capacity anticipated to increase gradually in February.
• From a technical perspective, the market is experiencing long liquidation, with open interest decreasing by 16.24% to 3,512 and prices falling by Rs 2.55. Aluminum has support at Rs 255.8, and if it breaks below this level, it could test Rs 253.8. Resistance is currently at Rs 261, and a move above this level could drive prices up to Rs 264.2.