Aluminum Inches Higher from YTD Low

Aluminum futures in the UK inched higher to $3,050 per tonne after testing year-to-date lows at below $3,000 on November 10th as momentary supply tightness offset the ample production backdrop in China. Tensions between the US and Iran continued to block aluminum from GCC production hubs, driving the prompt spread at the LME to widen to a five-month high of $94 per tonne, as inventories remain half of pre-war levels. Still, increasing production by Chinese smelters investing overseas kept global aluminum prices well below this year’s peaks. The annual cap of 45 million tonnes of primary aluminum in China drove local smelters to establish infrastructure across Southeast Asian and African countries, with ongoing projects set to add over 15 million tonnes of smelting capacity once finished. Indonesia leads the capacity growth, with new smelters set to increase primary aluminum production by up to 70% this year.

Aluminum futures in the UK hovered above $3,000 per tonne, but remained near multi-month lows amid improving supply outside the Middle East. China continues to offset reduced supply from the Gulf, with domestic output running close to record levels despite the government’s longstanding cap on production capacity. Chinese aluminum exports rose 25.9% year-on-year in September and reached their highest monthly level in three months, while Indonesian exports exceeded 150,000 tonnes in August. Although production across GCC states remains depressed, some smelters have begun to recover gradually. Emirates Global Aluminium said in late August that a quarter of the reduction cells at its Al Taweelah plant had been brought back online, with a full recovery in production expected by the first quarter of 2027. Adding to the positive supply outlook, Rio Tinto reached an agreement to extend operations at its Bell Bay Aluminium smelter in Tasmania through 2031.

Aluminum futures in the UK fell below $3,000 per ton in October, the lowest level year-to-date, fully erasing the rally since the start of the war between Iran and the US amid a stronger dollar and ample supply outside the Middle East. Aluminum smelting infrastructure in the Middle East was restarted at a faster pace than previously signaled following damage to facilities and operational halts caused by disruptions to natural gas production chains in the region. Emirates Global Aluminium said that a quarter of its Al Taweelah smelter in Abu Dhabi had resumed operations. In addition, Rio Tinto secured an agreement to keep its Bell Bay Aluminium smelter in Tasmania operational through the end of 2031, further boosting supply prospects. Also, China's exports have increased sharply in the period despite the 30% export duty faced by primary aluminum smelters, which drives secondary producers to focus on foreign markets. Alloy export volumes doubled y-o-y to 4.46 million tons through August.