Chinese aluminium prices hit a record high of 25,075 yuan/t ($3,592/t) today, driven by tight supply and buoyant market sentiment on the back of the geopolitical environment and strong copper prices, despite a slowdown in domestic demand.
The rising prices have significantly dampened buying interest among Chinese fabricators, while social inventories continue to increase.
The most-traded March aluminium contract on the Shanghai Futures Exchange (SHFE) reached 25,075 yuan/t ($3,594/t) and closed at Yn24,375/t today, up by 6.3pc from 31 December 2025.
Global aluminium supply growth has slowed because Chinese output is approaching its annual capacity cap of 45mn t, and European production has declined due to challenges in securing affordable power contracts.
On the demand side, market participants expect sectors such as new energy vehicles, photovoltaics, and artificial intelligence (AI) to continue supporting long-term aluminium consumption. These factors have helped sustain aluminium prices at high levels throughout 2025.
Recent surges in copper prices have also encouraged financial investors to enter aluminium contracts in anticipation of substitution effects, providing further support to the aluminium market. London Metal Exchange (LME) copper prices exceeded $13,000/t to hit a fresh record on 6 January, because investors sought safe-haven assets on the back of US military action in Venezuela.
Aluminium can replace copper in certain applications, such as air-conditioner manufacturing. When the copper-aluminium price ratio exceeds 3.5–4 — the ratio is currently 4.2 — substituting aluminium for copper offers significant economic advantages, according to market participants.
Slowing Chinese demand
The Chinese aluminium industry has been in a seasonal lull since November 2025, with fabricators maintaining limited purchasing activity. The recent price surge has further exacerbated this trend. Many fabricators, particularly in the construction sector, are delaying raw material purchases due to high costs, a trader told Argus.
Some producers of aluminium alloy doors and windows have raised finished product prices, while others are considering an earlier start to the lunar new year holiday on 16-23 February, another trader added.
Social inventories of aluminium ingots in China rose to 714,000t on 8 January, up from 645,000t on 30 December 2025 and 596,000t on 27 November 2025, reflecting ample supply and weak spot demand. Traders expect stocks to continue growing in January and February, given elevated prices and muted buying interest during the seasonal low period.
More companies are accelerating a shift toward magnesium in response to rising aluminium costs. Magnesium is used in battery casings, brackets, wheel hubs, and car seat frames. Magnesium's density is only two-thirds that of aluminium, offering significant weight reduction advantages for automotive applications.
