Recent aluminum market strength has been driven by low inventories, supply constraints, and geopolitical risk premiums rather than demand growth. LME and SHFE inventories have fallen to multi-decade lows, limiting supply flexibility and discouraging downstream restocking amid high prices.
On the supply side, China's aluminum capacity is nearing policy and energy limits, while new projects in the Middle East and Indonesia are unlikely to offset short-term supply risks. Ongoing Middle East tensions continue to support prices, though any easing could reduce the risk premium.
Higher primary aluminum prices have increased scrap aluminum costs while encouraging greater use of high-quality recycled aluminum. Over the long term, carbon reduction goals and energy constraints are expected to significantly increase the share of recycled aluminum in global supply.
Looking ahead, market direction will depend on inventory trends, the pace of new capacity additions, and end-user demand. Without stronger downstream orders, high prices may curb purchasing activity, increasing the risk of volatility and price corrections as new supply enters the market.
Aluminum market faces critical turn amid inventory tightness and capacity growth
19 Aug 2026 16:36 reported by Steven Yen
- A
- A
- A