Recently, both domestic and international aluminum prices have pulled back after reaching short-term highs. Meanwhile, alumina futures—representing a key cost component—have shown even weaker performance. On November 24, the front-month contract (AL2601) briefly dropped to RMB 2,707/tonne during trading hours, marking a six-month low.
Regarding the recent pullback in aluminum prices, Sun Kuangwen, non-ferrous metals analyst at Xinhu Futures, explained that the earlier rally was primarily driven by macro-level optimism and supply-side disruptions. In mid-November, as the prolonged U.S. government shutdown neared its end, market risk appetite surged significantly, lifting both aluminum-related equities and futures in tandem. Additionally, subdued expectations for supply growth further fueled bullish sentiment: domestic smelters had hit their effective capacity ceiling, while power constraints limited overseas capacity expansion—collectively reinforcing optimistic market narratives.
However, since last week, bullish sentiment has noticeably cooled. Multiple Federal Reserve officials delivered hawkish remarks, dampening market expectations for a December rate cut. Although the U.S. September unemployment rate rose slightly, non-farm payroll additions significantly exceeded forecasts, increasing uncertainty around the timing of potential rate cuts. Domestically, the macro policy environment has entered a “quiet period,” leading to reduced risk appetite and triggering a sharp correction in aluminum prices.
Fundamentally, the aluminum market remains weak. Demand is showing seasonal marginal softening, while supply-side conditions have seen little change. Although inventory levels have fluctuated, they remain relatively low overall. In general, recent price action has been dominated by macro-driven trading, with supply-side uncertainties serving more as a medium- to long-term narrative.
Notably, upstream alumina prices continue to weaken. Wang Xianwei, non-ferrous metals analyst at CITIC Securities Futures, noted that the oversupply situation in the alumina market has not meaningfully improved, keeping short-term price pressure intact. Although a few northern producers have curtailed output due to environmental regulations and cost pressures during the heating season, most producers are maintaining high operating rates to defend market share. This has pushed social alumina inventories to historic highs. Furthermore, since July, the futures market has consistently offered contango opportunities, driving a steady rise in registered warehouse warrants—now standing at a high of 250,000 tonnes—adding further downward pressure on alumina futures prices.
On the supply-demand front, Sun Kuangwen added that while operating alumina capacity hasn’t increased further recently, it remains at historically elevated levels, with daily output exceeding 260,000 tonnes. Downstream primary aluminum smelting capacity has remained largely stable, limiting incremental alumina consumption to around 235,000 tonnes per day. Moreover, as overseas alumina prices declined, export margins shrank, prompting a shift from net exports to net imports—China imported a net 13,000 tonnes in October—exacerbating domestic oversupply and pushing inventories higher, which in turn has driven both spot and futures alumina prices lower.
“As spot alumina prices continue to fall, nearly 8% of producers are now operating at a loss. Production cuts in December are likely to expand, which will increase resistance to further price declines. We expect alumina prices to remain weak but range-bound in the near term,” Wang Xianwei said.
Looking ahead, Wang believes aluminum prices may continue to weaken. “If the Fed confirms no rate cut in December, short-term macro support will diminish. Fundamentally, the aluminum market won’t see major shifts in December, but Q1 next year could face rising supply and weakening demand. New capacity in Xinjiang and Inner Mongolia is expected to come online by year-end, and some smelters have reduced their molten aluminum ratios, leading to higher anticipated ingot output. On the demand side, January–February is traditionally a seasonal lull ahead of Chinese New Year. The auto sector, which saw year-end production rushes this year, may experience softer operating rates early next year. With Shanghai aluminum open interest still elevated, if prices fail to rebound soon, we could see more profit-taking positions exit, further pressuring futures prices.”
Sun Kuangwen added that the current aluminum market fundamentals remain weak, characterized by marginally softening demand and stable supply. The supportive role of fundamentals on prices is limited; instead, sentiment swings driven by macro developments remain the dominant factor influencing futures prices. Key upcoming events to watch include the Fed’s December policy meeting and major domestic policy conferences in China. Over the medium to long term, while global supply is expected to remain ample, China’s macro outlook remains relatively optimistic, supporting a gradual upward shift in aluminum’s price center.
