Aluminium Market Analysis: Prices Drop Amid China's Limited Stimulus, U.S. Tariff Concerns, and Shifts in Global Demand

In recent trading sessions, aluminium prices experienced a notable dip of 1.3%, settling at 238.45, as market sentiment reacted to the limited impact of China’s newly introduced stimulus package. Designed to address local government debt concerns, the measures raised questions among investors about their effectiveness in boosting immediate demand for key commodities, such as aluminium. Meanwhile, additional concerns stem from the economic policies of incoming U.S. President Donald Trump, with proposed tariffs on Chinese imports creating uncertainty about the global metals market.

Amid these complex factors, aluminium prices are under pressure, as both demand-side and supply-side elements create a dynamic but cautious outlook. In this article, we examine the key aspects influencing aluminium prices today, covering China’s fiscal support, changes in aluminium production, export data, and technical levels that investors are watching closely.

China’s Economic Stimulus and Its Limited Impact on Aluminium Demand

China, as one of the world’s largest consumers and producers of aluminium, plays a pivotal role in shaping global aluminium prices. Recently, China’s government introduced a stimulus package aimed primarily at easing the financial burden on local governments, hinting that more supportive measures could follow. However, this package has not yet delivered a clear boost to metals demand, as its immediate focus was on financial stability rather than direct industrial stimulation.

The lack of a more aggressive stimulus left aluminium investors disappointed, as many had hoped for stronger measures to catalyze industrial growth. This uncertainty is currently dampening expectations for a rapid recovery in aluminium demand, affecting market sentiment and adding to bearish pressures on prices.

Tariff Concerns with the Incoming U.S. Administration

Adding to the market’s uncertainty are concerns over potential tariffs from the incoming U.S. administration. President-elect Donald Trump has proposed various measures targeting Chinese imports, and if tariffs were imposed on aluminium or related products, this could reduce demand for Chinese exports, subsequently impacting global aluminium consumption. Investors are closely watching these developments, as any tariffs could hinder international trade flow and reduce the demand outlook for metals, including aluminium.

China’s Aluminium Production and Capacity Shifts

On the supply side, China’s aluminium production saw a 1.69% year-on-year increase in October 2024, a modest rise reflecting resumed operations at certain smelters following technical upgrades. However, full production resumption across all facilities has been delayed, introducing a degree of uncertainty into the near-term production outlook. This staggered approach to production means that while overall output has increased, it may take additional time before the industry fully returns to previous capacity levels.

The timing of these resumptions is crucial, as aluminium demand typically sees seasonal strength during September and October, driven by downstream alloy demand. This period saw moderate demand increases, particularly in sectors relying on liquid aluminium, where the proportion of this form rose to 73.93%—up by 3.6 percentage points year-on-year.

These indicators of stable demand in peak season partially offset the broader concerns regarding pricing pressures and may offer some support to aluminium prices if demand remains steady in coming months.

Surge in China’s Aluminium Exports

A bright spot for China’s aluminium industry has been the remarkable growth in exports. In the first ten months of 2024, China’s exports of unwrought aluminium and aluminium products rose to 5.5 million tons, marking a significant 17% increase compared to the same period last year. October alone witnessed export growth of 2.7% month-on-month and an impressive 31% increase year-on-year, totaling 577,000 tons for the month.

This export momentum reflects robust global demand for Chinese aluminium, especially in markets where production costs and logistical challenges make imports more attractive. Favourable profit margins in the export segment have helped support China’s aluminium production, with September’s output reaching 3.65 million metric tons, a 1.2% increase over the previous year. These export trends contribute positively to China’s aluminium sector, potentially offsetting some of the domestic demand uncertainties linked to stimulus and tariff concerns.

Technical Analysis: Key Levels for Aluminium Prices

From a technical perspective, aluminium is currently experiencing long liquidation, with open interest declining by 10.17% to settle at 3,099 contracts. This suggests that some traders are closing long positions, possibly in response to bearish signals in the fundamental data.

Key technical levels are emerging as important benchmarks for the aluminium market. Support is now positioned at 237.1, and a break below this level could trigger further downside, potentially driving prices to 235.7. Conversely, on the upside, resistance is seen at 240.9. A move above this resistance level could give prices enough momentum to test the next target at 243.3.

These levels are critical for short-term traders, as movements through these support and resistance points could signal potential shifts in market sentiment, influenced by both fundamental developments and technical positioning.

Outlook: Balancing Demand Uncertainty with Supply Strength

The current aluminium market reflects a balance of mixed factors, with demand-side uncertainties due to policy factors in China and the U.S. and supply-side strength from increased Chinese production and exports. The potential for further stimulus from China could offer a boost if implemented with a stronger focus on industrial support, but investors are likely to remain cautious until more definitive measures are announced.

Moreover, while the U.S. tariff proposals add a layer of risk, the final impact will depend on the specifics of the policy. If imposed broadly, such tariffs could affect global metals demand. However, any delays or limitations in these tariffs could reduce the negative impact on Chinese exports, allowing the current strong export trend to continue supporting aluminium prices.

Conclusion: Navigating a Complex Aluminium Market Landscape

The aluminium market faces a unique combination of economic and geopolitical challenges, with prices under pressure due to both domestic policy developments in China and potential international trade barriers. China’s stimulus measures, though a positive step toward fiscal stability, have not yet reassured metals markets about immediate demand growth, leaving investors to grapple with an uncertain outlook.

Nonetheless, the steady rise in China’s aluminium exports provides a supportive counterbalance, suggesting that global demand remains resilient in key areas. As aluminium prices hover near critical technical levels, market participants will closely watch for further cues from China’s policy decisions and the U.S. trade agenda.

For investors, this environment calls for a balanced approach, monitoring both demand-side and supply-side indicators to navigate the evolving aluminium market landscape. The coming months will be telling as China’s economic policies unfold, and as international trade factors potentially reshape the aluminium industry’s global dynamics.