China’s Aluminum Market Faces Rising Inventories and Price Fluctuations

China’s aluminum industry remains the largest globally, supported by high production capacity and growing downstream demand. However, market dynamics are shifting due to increasing inventories, fluctuating raw material costs, and cautious buyer sentiment. Despite these challenges, facility expansions and policy adjustments continue to shape the long-term outlook of the sector.

Over the past week, the London Metal Exchange (LME) aluminum price increased by 0.64% to $2,665 per tonne, while the Shanghai Futures Exchange (SHFE) aluminum price declined by 0.31%, settling at RMB 20,656 per tonne ($2,880 per tonne). Spot market prices in China also fell due to rising inventory levels and restrained demand. In East China, aluminum spot prices dropped to RMB 20,572 per tonne ($2,868 per tonne), while in South China, prices reached RMB 20,566 per tonne ($2,867 per tonne), down 0.08% and 0.07% from the previous week.

Resumed production capacities have contributed to overall aluminum output growth, while the continued operations of key smelters have further supported supply. LME aluminum inventories declined, signaling a potential tightening in the global market. However, China’s domestic social inventory of aluminum ingots expanded significantly, reflecting stockpiling trends and slower consumption.

Increased production in downstream sectors, particularly in Guangxi and Henan, has driven potential aluminum demand. However, trading activity for aluminum ingots remained subdued over the past week as buyers exercised caution. While some industries maintained steady consumption, overall demand remained weak, stabilizing domestic aluminum prices.

Key cost components in aluminum production showed mixed trends. Alumina prices increased as downstream buyers continued purchasing, while prebaked anode prices remained stable. Power costs varied, with coal-fired power prices decreasing slightly and hydropower rates holding steady. Rising alumina costs have pressured overall production expenses, tightening industry profit margins as aluminum prices remain relatively low.

Alumina prices in China rose by 1.01% week-on-week to an average of RMB 3,361.69 per tonne ($469 per tonne). Market participants showed caution, with sellers and buyers struggling to align on pricing, leading to hesitant trading. In contrast, aluminum fluoride prices dropped by 0.32% week-on-week due to weak demand from smelters and an oversupply in the market.

Petroleum coke transactions varied, with mid- and high-sulfur grades seeing slight price increases, while low-sulfur grades faced downward pressure. Calcined coke prices remained mostly stable, with fluctuations depending on sulfur content and trace element requirements.

Prebaked anode prices remained stable at $614 per tonne in Shandong and $613 per tonne in Henan, supported by steady demand from aluminum smelters. Rising feedstock costs, including green petroleum coke and coal tar pitch, have kept profit margins tight. Cathode carbon lump prices also remained steady, with supply meeting demand for smelter maintenance and new capacity installations. Producers continued stable operations despite high raw material costs, ensuring a steady supply of cathode carbon materials for aluminum reduction cells.