Main conclusions
Overall, the recent successful breakthrough of aluminum prices through the resistance level of 21,000 yuan per ton and their stabilization are the result of the resonance of overseas supply disruptions, the start of domestic seasonal inventory reduction, and macro bullish sentiment.
Looking ahead, the characteristic of aluminum prices being "easy to rise but hard to fall" will continue. The core support lies in the rigidity of the supply side. The unexpected production cut at a smelter in Iceland once again highlights the structural problems such as power bottlenecks faced by the global release of electrolytic aluminum capacity. The restriction of China's 45 million tons capacity red line has led to a long-term lack of supply elasticity. Meanwhile, the ongoing structural transformation on the demand side and the loose liquidity environment brought about by the Federal Reserve's interest rate cut cycle have jointly provided medium - and long-term upward momentum for aluminum prices. In the short term, whether aluminum prices can continue to rise depends on the sustainability of inventory reduction and the downstream's acceptance of high aluminum prices. Although the copper-aluminum ratio is already at a high level, its recovery path in the short term relies more on the catch-up increase of aluminum prices themselves, and this requires a stronger marginal improvement in the fundamentals of aluminum as a driving force.
Overall, under the backdrop of a rigid supply support and a positive macro outlook, the aluminum price center is expected to maintain an upward trend. The subsequent movement needs to closely track the pace of inventory reduction and be influenced by changes in industrial policy expectations and macro sentiment. Shanghai aluminum is expected to show a volatile but relatively strong trend. The upper resistance level is expected to be within the range of 21,500 yuan/ton to 22,000 yuan/ton, and the support around 20,500 yuan/ton is relatively stable. It is recommended to adopt a bullish approach and continue to hold the previous long positions. In the long term, before the supply rigidity problem of aluminium is diluted, the phased pullbacks of aluminium prices are all buying opportunities worth paying attention to.
Since 2025, the aluminum price has shown an "N" shaped trend. After falling in April due to Trump's tariffs, the price has gradually recovered, and the price center has gradually risen. The bottom support has also risen from 19,500 yuan per ton. Since mid-June until now, the support has been relatively solid around 20,500 yuan per ton. By the middle and late October, the price of aluminium also broke through upward again amid market expectations.
On October 22nd, there were interfering factors in the operation of overseas electrolytic aluminum production capacity. LME aluminum rose in response and continued to break through upward in the following trading days, reaching a high of $2,889.5 per ton at one point, the highest since May 2022. The emergence of overseas electrolytic aluminum supply disruption factors has triggered bullish sentiment in the foreign market. Shanghai Aluminum has also followed suit to some extent, once again breaking through the resistance level of 21,000 yuan per ton. With the positive sentiment brought by important domestic meetings, it has gradually stabilized at 21,000 yuan per ton and is expected to further break through upward.
one
What were the reasons why the aluminum price was repeatedly blocked by the 21,000 yuan per ton level in the early stage?
The production cost of electrolytic aluminum has declined, and the industry's profits have continued to expand
Since October, the cost of electrolytic aluminum smelting has followed the decline due to the continuous drop in the price of alumina. The average profit of the industry has expanded again. The relatively high profitability has to some extent restricted the increase in aluminum prices.
According to SMM data, as of October 22nd, the average cost of electrolytic aluminum was approximately 16,092 yuan per ton. The average cost in October was 16,164 yuan per ton, a decrease of about 1.6% compared to the average cost of 16,425 yuan per ton in September. During the month, the cost of electrolytic aluminum mainly followed the decline in the price of alumina and continued to fall. As of October 22nd, the average profit of the electrolytic aluminum industry in October was 4,769 yuan per ton, an increase of approximately 9.88% compared to the average profit of 4,340 yuan per ton in September, indicating a continuous enhancement in profitability.
2. Domestic aluminum supply capacity remains strong, with accumulated aluminum ingot inventories suppressing
Under high profits, the overall operation of aluminum plant capacity has been stable. Coupled with the gradual completion of capacity replacement, the operation rate of China's electrolytic aluminum capacity continued to rise month-on-month in October. Currently, the capacity operating rate is continuously approaching its peak.
According to SMM data, as of the end of September, the national electrolytic aluminum production capacity operation rate was 96.12%, up 0.02% month-on-month and nearly 0.2% higher than the same period in 2024. The domestic built electrolytic aluminum production capacity was 45.84 million tons, and the operating capacity was 44.06 million tons. Both the operating capacity and the industry's operating rate saw a slight increase on a month-on-month basis, mainly due to the successive commissioning and resumption of production of the second-phase replacement project in Shandong-Yunnan and the previous technological transformation projects in Guangxi. In terms of output, the National Bureau of Statistics released a report showing that China's primary aluminum (electrolytic aluminum) output in September 2025 was 3.81 million tons, an increase of 1.8% year-on-year. From January to September, the output of electrolytic aluminum was 33.97 million tons, with a cumulative year-on-year growth of 2.2%. Overseas, according to SMM statistics, the total output of electrolytic aluminum in September 2025 was approximately 2.498 million tons, a decrease of nearly 1 million tons compared to August.
From a fundamental perspective, the operating rate of electrolytic aluminum production capacity has remained stable at a high level. The demand side during the peak season is relatively sluggish. Compared with the "rush installation" of photovoltaic power during the peak season in the first half of the year, there are no highlights. After entering the peak season, the inventory of aluminum ingots has not yet shown a turning point for inventory reduction. Moreover, with the continuous decline in the price of raw material alumina, The profitability of the electrolytic aluminum sector has gradually expanded to a relatively high level approaching 5,000 yuan per ton. Overall, the positive driving force provided by the fundamentals to the price is insufficient.
Although the aluminum price also crossed the resistance line during this period under the strong market expectation of the Federal Reserve cutting interest rates, as the sentiment was digested, the aluminum price also dropped again. Moreover, compared with copper, which has stronger financial attributes and more severe interference and shortage at the mining end and serves as a "barometer of the global economy", long funds lack confidence in the aluminum market. In the past month, the open interest of Shanghai aluminum futures has basically been around 500,000 hands, and the market momentum is slightly insufficient.
two
Where does the driving force for aluminum prices to break through come from?
In recent years, the solid bottom support for aluminum prices has come from two aspects: the rigidity of the supply side and the normal state of low aluminum ingot inventories due to the decline in ingot production. The driving force behind the upward movement of aluminum prices comes from the structural changes and growth expectations in demand under the long-term global green energy transition narrative, as well as the expectation of loose macro liquidity after the Federal Reserve enters a rinterest-rate cycle. It can be seen that the "easy rise but hard fall" of aluminum prices is jointly constructed by both its commodity attributes and financial attributes.
The recent rise in aluminum prices was triggered by disruptions in overseas supply and gradually attracted bullish funds, reflecting the further amplification of the rigidity problem in aluminum supply. The characteristic of aluminum as a frequently used variety in the industrial metal sector has also been highlighted once again. From the perspective of capital flow, since October 22nd, the open interest of Shanghai aluminum futures has been continuously rising. By October 24th, the overall open interest of Shanghai aluminum futures was over 600,000 lots. The strengthening of the bullish force has also become an important driving force for the recent rise in aluminum prices.
1. There are currently interfering factors in overseas aluminum supply
According to Mysteel information, Nor?, a wholly-owned subsidiary of Century Aluminum, ural Grundartangi ehf announced on the 21st that due to electrical equipment failure at the Grundartangi aluminium smelter in Iceland, one of its two electrolytic cell production lines was forced to temporarily suspend production. The production of the smelter has temporarily decreased by about two-thirds. The total production capacity of the aluminium smelter is 320,000 tons per year. The second-quarter report of Century Aluminum Industry shows that the aluminum plant is operating at full capacity. It is estimated that the scale of production suspension this time will reach 200,000 tons per year, and the time for resumption of production is still unclear.
For the global electrolytic aluminum industry, the more obvious bottleneck compared to the supply at the raw material and ore end lies in the release of electrolytic aluminum smelting capacity. Further, it is the issue of electricity costs. Most of the electrolytic aluminum production capacity in Europe that was shut down due to the soaring energy prices following the Russia-Ukraine conflict has yet to resume production as the related enterprises have found it difficult to sign long-term power supply contracts with reasonable prices in the future. Although China has competitive electricity costs, the 45 million tons capacity red line strictly restricts the expansion of capacity. The newly built electrolytic aluminum production capacity worldwide is mainly located in Indonesia in Southeast Asia and the Middle East. However, there is also the problem of incomplete power supply infrastructure, which makes the commissioning progress of the capacity relatively slow and difficult to match the growth rate of aluminum demand.
Therefore, the shutdown of the electrolytic aluminum plant in Iceland this time will cause a shortage of aluminum supply in the region and undoubtedly draw market attention once again to the relatively rigid global electrolytic aluminum supply.
2. Aluminum ingots are gradually entering a seasonal inventory reduction stage
Driven by the continuation of peak season demand, the increase in the industry's aluminum-water ratio and the decline in ingot production, the inventory of aluminum ingots gradually reached a seasonal turning point of inventory reduction in October.
From the dynamic changes in aluminum ingot inventories, it can be seen that in October, there was a situation where inventories were first accumulated and then sold off. In the first week of October, after the National Day and Mid-Autumn Festival holidays, the social inventory of aluminum ingots accumulated to 649,000 tons, an increase of 57,000 tons compared with September 30 before the holidays. The accumulation rate was slightly higher than that of the National Day holiday in 2024, but overall it was at the normal level of inventory accumulation during previous National Day holidays. The inventory build-up caused by the long holiday lasted for a relatively limited period of time. Then, by October 16th, the inventory of aluminum ingots began to decline and showed the persistence of inventory clearance. According to SMM data, as of October 23rd, the total social inventory of electrolytic aluminum ingots in China was 618,000 tons, 12,000 tons lower than the inventory in the same period of 2024. The inventory level has already reached the lowest point in the past three years for the same period, but the inventory gap compared with the same period of previous years has narrowed. After the industry's aluminum-water ratio dropped to 73% in July, it has been continuously rising since August. According to SMM data, as of the end of September, the industry's average aluminum-water ratio was 76.3%, an increase of 1.23% compared to August. From the weekly aluminum ingot outbound data, after the National Day holiday in October 2025, the weekly aluminum ingot outbound volume rebounded to the range of 130,000 to 140,000 tons, higher than the same period in 2024, and significantly increased compared with the weekly outbound data in September 2025. The decline in ingot volume and the increase in outbound volume have jointly driven aluminum ingots into the inventory clearance stage.
In terms of aluminum rods, according to SMM data, after the National Day holiday, on October 9th, the inventory of aluminum rods was 139,000 tons, an increase of 24,000 tons compared with before the holiday. As of October 16th, the inventory of aluminum bars also declined, and the downward trend continued. By October 23rd, the inventory of aluminum bars was 145,000 tons, nearly 40,000 tons higher than the same period in 2024, and also higher than the inventory level of the same period in the past three years.
Based on historical data from previous years, the inventory reduction of aluminum ingots after the "Golden September and Silver October" peak season may continue until January of the following year. Considering that the start of inventory reduction in the same period of 2025 is relatively late and there is a suppression of downstream purchasing sentiment by high aluminum prices, it is expected that the inventory reduction speed in 2025 will be relatively slow, and the inventory reduction period is also likely to continue until January or February of the following year. As the inventory of aluminum ingots has long been at a low level for the same period in history, the support of inventory for aluminum prices will persist for a long time. With the arrival of the trend of inventory reduction, the upward driving force of the inventory side on aluminum prices will be enhanced.
3. Medium - and long-term macro positive factors still exist
Under the backdrop of global competition, industrial chain adjustment and supply chain reconstruction, key strategic raw materials are undergoing a revaluation of their value. The strengthening of financial attributes and policy expectations have become the main driving forces, making high volatility in the commodity market a new normal in 2025. Aluminum, as an important strategic metal, has also seen its financial attributes magnified. The resonance between the macro and fundamental aspects has driven the price of aluminum to break through upward.
On the one hand, since the Federal Reserve resumed its rate-cutting cycle in September, market liquidity is expected to further ease, thereby providing a favorable macro environment for industrial metals including copper and aluminum. Meanwhile, the current market believes that this round of interest rate cuts is a preventive one. The signal it conveys to support the economy will also improve the demand expectations for aluminum. On October 24 local time, the latest data released by the US Bureau of Labor Statistics showed that the inflation data for September was lower than expected across the board. Data shows that the US consumer price index (CPI) rose by 0.3% month-on-month in September, lower than the 0.4% in August this year and market expectations. The year-on-year increase was recorded at 3%, 0.1 percentage point lower than expected, but 3% remains the highest level since June 2024. The year-on-year CPI in the United States in September has not risen significantly for the time being and remains at a relatively low level overall, further increasing the probability of the Federal Reserve cutting interest rates on October 30. According to CME's US dollar interest rate futures, as of October 26th Beijing time, the market expects a probability of the Federal Reserve cutting interest rates by 25 basis points on October 30th to be 98.3%. The probability of another 25 basis point interest rate cut on December 11th is 91.1%, and the upper limit of the federal funds target rate may drop to 3.75%.
On the other hand, China is currently in the layout period of a new "Five-Year Plan", which also leads to certain policy expectations in the market. The Fourth Plenary Session of the 20th Central Committee of the Communist Party of China was held in Beijing from October 20 to 23, 2025. The communique of the meeting was released on October 23 (hereinafter referred to as the "Communique"). The meeting reviewed and approved the "Proposal of the Central Committee of the Communist Party of China on Formulating the 15th Five-Year Plan for National Economic and Social Development" (hereinafter referred to as the "Proposal for the 15th Five-Year Plan"), and set the tone for the economic situation and policy direction within the year. The communique pointed out that the plenary session highly appraised the major achievements made in China's development during the 14th Five-Year Plan period, pointed out the six major principles that must be followed in economic and social development during the 15th Five-Year Plan period, clarified the main goals of development, and made twelve major deployments. Among them, key development directions such as "accelerating high-level self-reliance and self-strengthening in science and technology and leading the development of new quality productive forces" and "accelerating the comprehensive green transformation of economic and social development and building a beautiful China" will also provide policy benefits for the terminal application fields of aluminum, continue to promote the structural transformation of aluminum demand and stimulate more new growth points of demand A more complete "15th Five-Year Plan" requires attention to the National Two Sessions in March next year.
three
The copper-aluminum ratio may remain at a relatively high level
The "copper-aluminum ratio" is an important indicator for measuring the relative strength of copper prices and aluminum prices, and it has received much attention in the commodity market and macroeconomic analysis. Its calculation formula is "copper price/aluminum price". Due to the highly overlapping application scenarios of copper and aluminum in fields such as power, construction, and transportation, and the existence of a certain substitution relationship, the price trends of the two usually show a positive correlation. However, the differences in their supply and demand fundamentals and financial attributes can lead to periodic fluctuations in the ratio. The high and low positions that deviate from the historical average range often indicate potential "mean reregression" trading opportunities.
Looking back at the data of the past five years, the copper-aluminum ratio has mostly fluctuated around the central level of 3.6 to 3.8. However, as of October 27th, since the beginning of 2025, driven by the resonance of macro sentiment and fundamentals, the copper price has risen by more than 20%, significantly higher than the approximately 7% increase in the aluminum price. This divergent trend led to the copper-aluminum ratio rapidly rising to around 4.1, significantly deviating from the long-term mean range, which has drawn market attention to the restoration of the copper-aluminum ratio.
The restoration of the copper-aluminum ratio is usually achieved through two paths: one is the substitution demand at the industrial level, and the other is the trading behavior in the financial market. However, both of them are currently facing practical constraints.
(1) Industrial substitution: Long-term support is clear, but short-term driving forces are limited
The economic effect of "replacing copper with aluminum" is more prominent when the copper-aluminum ratio is high. By stimulating the demand for "replacing copper with aluminum", it brings an expected increase in aluminum consumption and thus forms a long-term support for aluminum prices. However, the realization process of "replacing copper with aluminum" is restricted by factors such as technical standards, product certifications, and production line renovations, resulting in a relatively long realization cycle. Its substitution scope is also mostly limited to individual fields such as power. Therefore, it is difficult to form a demand shock sufficient to reverse market prices in the short term, which limits its immediate driving force for ratio repair.
(2) Financial transactions: Theoretically feasible, but in reality, they face strong resistance from copper prices
From the perspective of financial market behavior, shorting the copper-aluminum ratio is the direct force driving the ratio's recovery. However, the effectiveness of this strategy depends on a weakening copper price or a relatively strong aluminum price. At present, the favorable macro sentiment resonates with the strong fundamentals such as the tight supply at the copper mine end, providing a solid support for copper prices. The market lacks effective short-selling forces. Against this backdrop, if the logic of ratio repair is to be realized, its path will rely more on the catch-up increase in aluminum prices. As a result, the market has seen expectations that the catch-up increase in aluminum prices will be driven by ratio repair. However, as mentioned earlier, the single "replacing copper with aluminum" substitution logic at the industrial level is not strong enough in the short term. The catch-up increase in aluminum prices may require a stronger inherent fundamental to provide support for price hikes.
Although the copper-aluminum ratio has reached a high level, its recovery logic provides support at the bottom and upside potential for aluminum prices. However, we believe that the driving force for the recovery of the copper-aluminum ratio is structurally restricted: the long-term nature of industrial substitution and the strong resistance of copper prices faced by financial transactions jointly restrict the rapid release of the recovery momentum. Against the backdrop of unresolved copper mine supply issues and a solid bullish logic in the medium and long term, copper prices have demonstrated stronger upward momentum. This makes it more likely that the copper-aluminum ratio will remain at a relatively high level above 4.0 during this period rather than rapidly decline.
Therefore, when investors make their layout based on the logic of the copper-aluminum ratio, they need to pay more attention to the marginal changes in the supply and demand fundamentals of aluminum itself, regarding it as a key supporting factor rather than a core driving force.
four
The upward trend of the aluminum price center remains unchanged, and an upward breakthrough is still expected
Overall, the recent successful breakthrough of aluminum prices through the resistance level of 21,000 yuan per ton and their stabilization are the result of the resonance of overseas supply disruptions, the start of domestic seasonal inventory reduction, and macro bullish sentiment.
Looking ahead, the characteristic of aluminum prices being "easy to rise but hard to fall" will continue. The core support lies in the rigidity of the supply side. The unexpected production cut at a smelter in Iceland once again highlights the structural problems such as power bottlenecks faced by the global release of electrolytic aluminum capacity. The restriction of China's 45 million tons capacity red line has led to a long-term lack of supply elasticity. Meanwhile, the ongoing structural transformation on the demand side and the loose liquidity environment brought about by the Federal Reserve's interest rate cut cycle have jointly provided medium - and long-term upward momentum for aluminum prices. In the short term, whether aluminum prices can continue to rise depends on the sustainability of inventory reduction and the downstream's acceptance of high aluminum prices. Although the copper-aluminum ratio is already at a high level, its recovery path in the short term relies more on the catch-up increase of aluminum prices themselves, and this requires a stronger marginal improvement in the fundamentals of aluminum as a driving force.
Overall, under the backdrop of a rigid supply support and a positive macro outlook, the aluminum price center is expected to maintain an upward trend. The subsequent movement needs to closely track the pace of inventory reduction and be influenced by changes in industrial policy expectations and macro sentiment. Shanghai aluminum is expected to show a volatile but relatively strong trend. The upper resistance level is expected to be within the range of 21,500 yuan/ton to 22,000 yuan/ton, and the support around 20,500 yuan/ton is relatively stable. It is recommended to adopt a bullish approach and continue to hold the previous long positions. In the long term, before the supply rigidity problem of aluminium is diluted, the phased pullbacks of aluminium prices are all buying opportunities worth paying attention to.
