Supply tightness builds globally
Production issues at major smelters have also contributed to the price hike, amplifying concerns of a supply squeeze. The suspension of one potline at Iceland’s Grundartangi smelter, Alcoa’s decision to close the Kwinana alumina refinery in Australia, and output cuts at Century Aluminium’s Iceland plant due to electrical failures have all reduced global capacity. These developments mark a notable shift after years of consistent oversupply.
Kedia noted as traders increasingly bet on a structural rebalancing of the market, fund inflows into LME aluminium contracts have risen sharply. The growing optimism also stems from the belief that the era of chronic oversupply may be ending.
China’s measures lift demand outlook
China’s announcement of new growth-boosting measures and easing deflationary pressure is another factor behind this growth. The government’s pledge to cap smelting capacity at 45 million tonnes shows continued policy restraint, though analysts said production could still edge above this limit amid strong demand.
Meanwhile, Shanghai Futures Exchange inventories slipped 0.2 per cent week-on-week, reflecting solid consumption from downstream sectors. Aluminium imports surged 35.4 per cent year-on-year to 360,000 tonnes in September, while exports touched 542,000 tonnes in July, highlighting China’s crucial role in market balance.
Beyond China, regional indicators also point to firm physical demand.
