Aluminum Futures Surge on Supply Crunch Fears

Aluminum futures in the UK climbed to around $2,950 per tonne in December, hovering near their highest level in more than three years and positioning prices for an 18% gain this year. The rally is being driven by escalating concerns over tightening global supply.

China—the world’s largest aluminum producer—has reaffirmed its commitment to curb overcapacity in the metals sector to ease deflationary pressure on manufacturers. With national output on track to breach the 45-million-ton cap in 2025, Chinese smelters are expected to limit production growth in 2026.

As a result, producers are increasingly selling capped supply domestically rather than exporting, pushing China’s aluminum exports down 9.2% year-on-year in November.

Efforts by Chinese smelters to expand capacity overseas, particularly in Indonesia, are also facing headwinds due to rising energy costs and regulatory uncertainties.

Beyond China, global supply constraints have intensified. High power prices, equipment failures, bauxite shortages, and geopolitical risks have disrupted or suspended operations at key smelters in countries such as Iceland, Mozambique, and Australia, further tightening the market and underpinning aluminum prices.