LME aluminum prices closed at a six-month high on September 16, driven by market concerns that China—the world’s largest producer—is approaching its annual production ceiling of 45 million metric tons. Meanwhile, the U.S. Midwest premium surged to a record $0.7323 per pound.
According to MetalMiner data, global aluminum prices broke out of their sideways trend observed earlier this year, with the Monthly Metals Index (MMI) edging up 0.56% from August.Market participants worry that China’s production constraints could lead to a supply-demand gap, particularly as grid infrastructure projects worldwide accelerate.
China’s aluminum industry faces a paradox: while its 2017-imposed output cap is within reach (estimated capacity hit 45.69 million tons in June), weak domestic demand—especially from the sluggish property sector—is pushing producers to increase exports. However, Western trade barriers, including U.S. tariffs and the EU’s Carbon Border Adjustment Mechanism (CBAM), are tightening access to key markets.
Despite supply concerns, actual production has not contracted. China’s primary aluminum output rose 7.4% year-over-year in June, and global production remains stable.
Although LME inventories are low, they have begun to rebound partly due to warehousing adjustments after sanctions on Russian metal. China has absorbed more Russian aluminum (imports up 38% YoY), indirectly sustaining global supply. On the demand side, U.S. tariffs dampened North American consumption, with H1 2025 demand falling 4.4%. Canadian producers pivoted to Europe, with Quebec’s exports to the region jumping from 0.2% in Q1 to 18% in Q2.
The U.S. Midwest premium’s rally reflects near-full pricing of tariff costs. Asian markets showed mixed trends: Indian primary cash aluminum led gains, rising 1.75% to $2.91/kg by September 1, while Chinese prices increased 1.46% to $2,892/ton. In contrast, Korean aluminum premiums fell over 5%. Goldman Sachs had cut its price forecast in April, warning of a potential surplus by 2026 if demand recovery underwhelms.
Short-term price sustainability hinges on whether China strictly enforces its output cap and whether Western infrastructure demand can offset macroeconomic headwinds. The market is navigating a new equilibrium between policy interventions and fundamental realities.
