Bright future for aluminium prices in 2025? China’s production may slow down

Slower growth in production in China is likely to drive aluminium prices higher in the coming years, experts at Commerzbank AG said. 

The aluminium price experienced ups and downs in 2024, but those were not as pronounced as in copper. 

Aluminium prices on the London Metal Exchange had climbed to $2,800 per ton at the end of May, which remains this year’s high for the metal. 

“The price was still a long way from its all-time high of over USD 4,000 in spring 2022 after the outbreak of war in Ukraine, but so far this year, aluminium has actually performed slightly better than copper with a gain of around 6.5% since the start of the year,” Barbara Lambrecht, commodity analyst at Commerzbank AG, said in a note. 

Lambrecht expects prices to continue its climb next year, and the metal to establish around the $2,800 per ton mark in the second half of 2025. 

Slowdown in China’s aluminium production

China accounts for 60% of global primary aluminum production and 50% of total aluminium production, according to Commerzbank. 

China has expanded its aluminum production in recent years. 

This year, too, a new monthly record was set in August with 3.73 million tons and most recently in November daily following the ramp-up of new capacities, according to the German bank. 

However, there are signals of a slowdown in production. 

The rise in input prices could prompt the plants to slow down production. The price of alumina contracts on the Shanghai Stock Exchange jumped by 50% between August and December. 

This is likely to increase input costs and also reduce the margins of producers. 

Meanwhile, China's National Reform Commission presented plans to reduce emissions in the aluminium industry at the beginning of July. 

New coal-fired smelters will no longer be approved and no new aluminium smelting capacity will be built in regions with stricter emissions controls under this plan. 

Lambrecht said:

Aluminium demand

Even as there are signs of a slowdown in production, demand is expected to remain robust for aluminium. 

Even though China’s real estate continues to struggle, demand for aluminium is likely to keep rising from the expansion of renewable energies and electromobility. 

Aluminium is increasingly being used to reduce the weight of electric cars and thus increase their range. 

“However, it must also be recognised that growth expectations in this segment in particular will have to be revised downwards in the US with the upcoming term of office of US President-elect Donald Trump,” Lambrecht added. 

Aluminium prices: tariffs and sanctions

The US and the UK imposed an embargo on Russian aluminium in April 2024. 

Since then, no Russian aluminium produced after April 12, 2024, is allowed to be stored in LME warehouses.

Trading of Russian aluminium also remains prohibited. 

The EU has so far only sanctioned individual aluminium products and, according to Reuters, still obtained 6% of its primary aluminium imports from Russia in the first nine months of the current year. 

“However, this is significantly less than in 2022, when the share was still 20% in the same period,” Lambrecht said. 

The sanctions against Moscow have initially prompted a change in trade routes for the metal, according to Commerzbank. 

In 2023, China purchased significantly more aluminium from Russia, compensating for the lower imports from Western countries. 

This year the scenario has changed as less aluminium from one of the top exporters, Russia, is available to the global market.

Exports from Russia have fallen sharply. 

According to a recent Reuters report, 10 European Union countries have called for tougher sanctions against the Russian metal sector. 

This could further tighten supply as new trades have to be established first, according to Lambrecht.