Aluminum Market Update

The Aluminum Monthly Metal Index (MMI) saw a 0.56% increase from August to September, indicating a generally stable trend with a slight upward bias. Interestingly, global aluminum prices have hit remarkable highs since the start of the year. Keeping an eye on monthly indexes for other metals can provide further insight into the industrial metals market.

Rising Aluminum Prices Amid Supply Concerns

On September 16th, LME aluminum reached a six-month peak, reflecting concerns over potential production deficits as China’s output nears established caps.

For a long time, China’s aluminum industry has contributed to global overcapacity. State subsidies provided a significant edge to Chinese producers, while rising energy costs and increased global supply have posed challenges for their competitors abroad. In response, Western nations are implementing trade barriers, such as tariffs from the U.S. and the EU’s carbon border adjustment mechanism (CBAM), which threaten China’s export activities.

Amidst these issues, domestic demand in China remains lackluster. The property sector, historically a major aluminum consumer, shows little sign of recovery. As a result, China established a production cap of 45 million tons in 2017 and insists on a “closed loop” system where existing capacity must be shut down before new facilities can be developed.

Throughout this year, despite global stock declines, market reactions to the Chinese production cap have felt somewhat muted. In April, Chinese output was reported at around 44 million tons, nearly reaching this cap. However, projections estimate the country’s capacity could hit 45.69 million tons by June, raising questions about how production might fare moving forward, particularly as the world embarks on grid infrastructure developments expected to spike aluminum demand.

Challenges Looming for Aluminum Prices

Despite renewed momentum in aluminum prices driven by deficit concerns, there’s some hesitation regarding steep price increases. While China may be close to its production cap, global production levels are still on the rise. The National Bureau of Statistics of China reported a 7.4% year-on-year increase in primary aluminum production for June, signaling that global output is not yet significantly affected.

Moreover, both the SHFE and LME have reported low exchange inventories, although these levels are starting to rebound. This increase may alleviate some supply-side anxiety, but much of it is linked to the halting of Russian material as a consequence of the ongoing war in Ukraine. While Europe restricts Russian imports, China continues to purchase this aluminum, effectively filling the vacuum left by European buyers. Recent import data highlighted a 38% rise in China’s aluminum imports from the previous year, indicating that sanctions have redirected, but not eliminated, Russian material from the international market.

Declining U.S. Aluminum Demand

On the other hand, U.S. tariffs have hindered domestic aluminum demand, reshaping trade dynamics. According to the Aluminum Association, North American aluminum demand dropped 4.4% in the first half of 2025, impacting various market segments. Notably, aside from foils, demand has slipped across the board.

In response to sluggish demand and tariff pressures, Canadian producers are shifting aluminum shipments toward Europe. Data revealed that the European share of Quebec’s aluminum exports increased from 0.2% in Q1 to 18% in Q2.

This overall sluggishness in demand continues to weigh on market sentiment. Back in April, Goldman Sachs revised its aluminum price forecasts indicating a weaker economic outlook; they projected a potential surplus through 2026 if recovery doesn’t materialize as hoped.

So, while long-term deficit concerns linger, the short-term price expectations feel uncertain. Economic growth is still underway, albeit at a slow pace, and only time will tell if China maintains its production caps or if other global producers can boost output to balance out the anticipated shortages.

Aluminum Midwest Premium Hits New High

The Midwest Premium has soared along with LME aluminum prices, reaching a new all-time high of $0.7323 per pound. By mid-August, prices seemed stable, aligning with expectations shaped by U.S. tariffs.

With the recent surge beyond $0.73 per pound, the premium is closing in on predictions. Uncertainties regarding trade policies linger, yet the domestic market appears relatively steady, with most products showing stable or slightly increased mill lead times.

Notable Price Movements in Aluminum

• India’s primary cash aluminum price marked the largest increase of the index as of September 1, up 1.75% at $2.91 per kilogram.
• China’s primary cash aluminum price also saw a rise of 1.46% per metric ton, reaching $2,892.
• The premium for Korean 5052 coil dropped 5.69% to $4.18 per kilogram.
• Korean 3003 coil premium decreased by 5.86% to $4.08 per kilogram.
• The commercial 1050 seat price in Korea fell 5.92% to $4.04 per kilogram.