Three-factor competition
The price of aluminum has reached a new historical high, which not only consolidates its status as a strategic resource and enhances its value for hedging purposes, but also opens up upward potential. However, high inventories in the industry, weak demand before the Spring Festival, and strengthened risk control measures by the regulatory authorities may cause market sentiment to gradually return to rationality.
Since 2026, the aluminum price has continuously broken through key resistance levels within a short period of time and on January 28th, it saw an increase in trading volume and reached a historical high of 25,640 yuan/ton, with an intraday increase of 5.75%. On the same day, the LME March aluminum price also climbed to a historical peak of 3295.5 US dollars/ton. The high-lying fluctuations and sudden rallies of the aluminum price no longer reflect a simple pricing based on fundamental supply and demand contradictions, but rather a long-term revaluation of the global value of aluminum as a key strategic resource. In the future, the aluminum price will present a continuous tug-of-war pattern under the influence of three factors: risk premium fluctuations, market sentiment games, and the actual situation of industry fundamentals.
Geopolitical disturbances have further increased supply risks.
Currently, the scarcity of resources, combined with the vulnerability of supply chains caused by frequent geopolitical conflicts, is profoundly reshaping the pricing logic of industrial metals such as copper and aluminum. The direct trigger for this round of aluminum price movement was the escalation of the geopolitical conflict between the United States and Venezuela during the New Year holiday. Although this event did not directly impact the physical supply chain of the global aluminum industry, the risk signals it released once again sounded the alarm for the financial market. South America, as the core production area for key minerals such as copper and lithium, the geopolitical stability of this region has seemingly become the "Doomsday Sword" hanging over the commodity market. The market prices this uncertainty, and this has driven the nonferrous metals sector to enter a bullish trend.
For the aluminum industry, a more direct and substantive threat is lurking in the Middle East region. Countries like Iran in the Middle East account for approximately 8.3% of the global electrolytic aluminum production capacity. Moreover, Iran's aluminum production is highly dependent on raw material imports. Currently, the relationship between the United States and Iran remains tense, and Trump has even stated that he will soon impose a 25% tariff on all countries conducting trade with Iran. This measure will significantly increase the production costs of Iranian aluminum enterprises that rely on imported raw materials, and it may even lead to logistics disruptions or production halts, thereby causing a supply disruption in electrolytic aluminum in the Middle East region. This supply gap will directly exacerbate the tight balance in the global electrolytic aluminum market.
Furthermore, the persistently high spot aluminum premiums in the European and American markets have further spread to the Asian markets. It has been disclosed that the aluminum premium sent to Japan in the first quarter of 2026 was finally set at 195 US dollars per ton, a significant increase of 127% compared to 86 US dollars per ton in the fourth quarter of 2025. This data once again confirms that, under the backdrop of the global supply chain restructuring, market concerns about future aluminum supply shortages are continuing to intensify.
It is easy to observe that the impact of geopolitical conflicts continues to spread, triggering a series of chain reactions such as preventive stockpiling, trade flow shifts, and speculative buying of capital. The combined effect of geopolitical disturbances and risk premiums has driven the fluctuations in aluminum prices to increasingly deviate from the actual situation of the industry.
Stock and bond price linkage highlights the value of diversified investment.
From the performance of the financial market, the asset attributes of aluminum have also been strengthened. On January 28th, the resource-related sectors with the character "A" in the A-share market collectively strengthened, and this led to a significant increase in related assets in the futures market. Among them, the stock prices of leading companies in the aluminum industry were particularly outstanding, demonstrating a strong stock-futures linkage effect. This may not be a simple sector rotation, but rather the capital market's continuous bet on key strategic resources including aluminum under the grand narrative of the "periodic table of elements" investment logic and the reconstruction of the global supply chain. The position of the aluminum futures contract increased by nearly 100,000 lots within a single day, indicating a significant increase in the bullish allocation attribute of aluminum in the market. With the further recognition and layout of the strategic resource status of industrial metals by capital, the non-ferrous metal sector including copper and aluminum still possess strong upward potential.
However, in stark contrast to the intense situation at the macro and capital levels, there is a "cold reality" faced by the industrial fundamentals. The first quarter is traditionally a low-demand season for metals, and the main consumption sectors also show signs of weakness. The new energy vehicle market is in a period of waiting and observing as it transitions from policy subsidies; traditional car consumption is sluggish; and the home appliance industry is entering a production off-season. Industry Online data shows that in February 2026, the total production volume of air conditioners, refrigerators, and washing machines decreased by 22.1% year-on-year. The current rise in aluminum prices has further squeezed the profits of downstream processing enterprises, leading to a sharp decline in their purchasing intentions. According to data from Shanghai Metals Market, the aluminum spot market maintains a deep discount ranging from -190 yuan/ton to -160 yuan/ton, only sufficient for rigid production. Although there was a certain demand for stockpiling before the Spring Festival, in the face of high prices, the stockpiling volume may be more cautious.
Weak demand has also affected the inventory levels. According to data from Shanghai Metals Market, as of January 29th, the social inventory of aluminum ingots has risen to 782,000 tons, and the inventory of aluminum rods is 243,500 tons. The overall situation has entered a period of inventory accumulation. It is worth noting that this year's inventory accumulation turning point is significantly earlier than in previous years, and it is breaking the pattern of "low inventory as the norm" in recent years. As the Spring Festival holiday approaches, the shutdown and vacation of processing enterprises will bring a consumption vacuum period. The market generally expects that the inventory will continue to accumulate to the historical peak level in February, which will become the strongest factor suppressing aluminum prices.
Price comparison leads to a rebound, and the increase in demand is either insignificant or limited.
The copper price rose rapidly in the early stage, pushing the copper-aluminum price ratio to a high of 4.4. This provided a clear price-upward momentum for aluminum. Although the ratio has now returned to a certain extent, it remains at a relatively high level above 4. The copper price, based on the core narrative of supply shortage in the mines and its stronger financial attributes, is expected to maintain a relatively strong trend and continue to provide psychological support for the aluminum price through the price ratio effect. However, "replacing copper with aluminum" is a more long-term process. Due to technical standards, application habits, and performance differences, it is difficult to form a large-scale demand substitution in the short term, and there are limitations on the substantive increase in demand.
Recently, the aluminum price has experienced a rapid increase that is not based on fundamentals, and the potential risks have been gradually intensifying. To maintain the stable operation of the market, domestic regulatory authorities have promptly taken targeted measures. The Shanghai Futures Exchange has successively introduced risk control measures for aluminum and other products within one month, aiming to guide market transactions to be standardized and prevent and defuse potential risks. Currently, the relevant policies have begun to show results, and market sentiment is gradually returning to rationality. The timely guidance of regulatory policies, coupled with the approaching Spring Festival, will curb the short-term excessive rise in the aluminum price.
Overall, in the context of continuous geopolitical risks and the fragility of global supply chains, the new record high of aluminum prices has once again solidified its strategic resource attribute and its value for multi-head allocation. It has also opened up upward price potential. The high inventory on the industrial side, weak demand before the Spring Festival, and the strengthened risk control measures by regulatory authorities may gradually bring the overheated market sentiment back to rationality. It is expected that the aluminum price will fluctuate within the core range of 23,500 - 25,500 yuan/ton, with a high volatility. It is recommended that the long positions control their positions and be cautious of market anomalies and the risk of rebound and decline before the sensitive time point of the Spring Festival.
