Aluminum Prices Hover at Highs: A Tug-of-War Between Supply and Demand

Updated: July 31, 2025 – The global aluminum market is in a complex state of equilibrium. Although macroeconomic factors, such as the easing of Sino-US tariff policies, have sent positive signals, aluminum prices continue to fluctuate within a narrow, elevated range. A deeper analysis reveals a clear confrontation between price-supporting factors (like low inventories) and pressuring factors (like abundant supply and weak downstream demand).

Price Action and Macroeconomic Factors

In recent trading sessions, aluminum prices have shown slight volatility. On the London Metal Exchange (LME), the 3-month forward price has ranged between $2,607 - $2,670 per tonne. Similarly, the main aluminum contract on the Shanghai Futures Exchange (SHFE) has remained around CNY 20,540 per tonne.

On the macro front, the market has noted positive signals from the US exempting some Chinese products from tariffs. While this move helped improve general market sentiment, its direct impact on aluminum prices was not significant, and the market appears to have already digested this information. Currently, fundamental supply and demand factors are playing a more decisive role in price trends.

The Supply-Demand Balance: A Mixed Picture

The market's tug-of-war is best illustrated by analyzing supply and demand factors:

• Supply Side (Bearish Pressure): China's domestic aluminum supply remains high and stable. Although there were some concerns about production cuts due to power restrictions in provinces like Yunnan, the overall impact on the general supply has been negligible. This abundant supply creates a natural barrier, limiting the upward momentum of prices.
• Demand Side (Bearish Pressure): Demand from downstream industries is currently in a traditional off-season. Processing and manufacturing enterprises are showing caution, with relatively weak new order volumes. This is reflected in the increase in aluminum ingot inventories, indicating that producers of aluminum sheets and other fabricated products are slowing down their raw material purchases.
• Inventory (Bullish Support): Contrary to the weakness in demand, China's total social inventory of aluminum remains at a relatively low level. This low inventory acts as a "buffer," preventing prices from falling sharply and is the main factor keeping aluminum prices at their current high levels.

Short-Term Market Outlook

The short-term aluminum market is expected to continue trading sideways within its current price range. The stalemate between low inventories supporting prices on one side, and ample supply with weak demand pressuring them on the other, will likely persist. Any price breakout (up or down) will require a stronger catalyst, such as a sudden shift in macroeconomic policy or a significant improvement in consumption from downstream industries.

Overall, the role of aluminum in the economy remains crucial, but in the short term, the market is in a fragile state of equilibrium.