Navigating price volatility and evolving supply chain dynamics in the aluminium industry
The aluminium industry is grappling with dual forces of price volatility and supply chain transformation. While macroeconomic uncertainties and trade policies inject short-term turbulence, long-term shifts in recycling, regional self-sufficiency, and inventory strategies are reshaping the sector. Below, we analyse key drivers, emerging trends, and data-backed projections for 2025 and beyond.
Price volatility: short-term pressures vs. long-term support
Recent price swings reflect a clash between bullish fundamentals and bearish macro risks:
Key drivers in 2025:
- Trade barriers: Escalating tariffs, including a 10 per cent US duty on Chinese imports followed by 25 per cent blanket tariff worldwide, threaten export flows and amplify price uncertainty[1][2].
- Supply-demand mismatch: Chinese aluminium inventories surged to 800,000 tonnes in March 2025, yet steady demand from EVs and infrastructure kept spot prices elevated at RMB 20,500/tonne[1][3].
- Cost Pressures: Alumina prices fell 9.19% WoW to RMB 3,535/tonne in February, squeezing smelter margins despite higher aluminium prices[2].
Divergent Regional Trends (March 2025):
| Market | Price Trend | Key Influence |
| LME | ↑ 0.64% to $2,665 | Tightening global supply[3] |
| SHFE | ↓ 0.31% to RMB 20,656 | Rising Chinese inventories[3] |
| U.S. Domestic | Rising | Reduced Chinese imports post-tariffs[2] |
Supply chain resilience: strategic shifts
The industry is adopting a multi-pronged approach to mitigate disruptions:
- Recycling acceleration
Recycling now accounts for ~60% of US aluminium supply, driven by its 95% energy savings compared to primary production[4][5]. Closed-loop systems are streamlining logistics and reducing reliance on fragmented raw material networks.[5]
- Regional self-sufficiency
The US plans to bridge a 4-million-tonne supply gap through:
- Smelter restarts: Idled capacity reactivation.
- Policy support: Incentives for domestic scrap processing[4].
- Diversified imports: Heavy reliance on Canadian imports (85% of total)[4].
3. Inventory strategy pivot
Companies are shifting from just-in-time to just-in-case stockpiling, with Chinese social inventories growing 12% MoY in Q1 2025[5][3].
2025-2026 outlook: risks and opportunities
Bullish factors:
- Demand growth: Global aluminium consumption is projected to rise 4.2% YoY, led by EV and renewable energy sectors.[1][2]
- Policy tailwinds: US infrastructure bills and China’s “golden March, silver April” seasonal demand could tighten Q2 supplies. [6][1]
Bearish risks:
- Overcapacity: Chinese operating rates hit 92% in February, risking oversupply if demand falters[6].
- Trade Wars: A 25% US tariff could slash Chinese exports by 300,000 tonnes annually. [2]
Prediction scenarios
| Scenario | Trigger | Price Impact (LME) |
| Tariff Escalation | U.S.-China trade war reignites | ↓ 8-12% to $2,400 |
| Demand Surge | Faster EV adoption in Europe | ↑ 15% to $3,050 |
Strategic recommendations
• For Buyers: Hedge against Q3 volatility using SHFE futures, currently trading at a 1.2% discount to spot.[3][7]
• For Suppliers: Invest in regional recycling hubs to cut transport costs by 18-25%. [5]
• Policy Makers: Balance tariffs with scrap export bans to stabilise domestic markets.[4][2]
For deeper insights, explore Roadmap for US Supply Chain Resilience and Q1 2025 Market Analysis.
The aluminium market’s trajectory hinges on navigating geopolitical tensions while capitalising on recycling and regionalisation trends. Stakeholders must remain agile, leveraging data-driven strategies to thrive in this evolving landscape.