The main contract of Shanghai aluminum futures, AL2511, surged to a new high of 21,205 RMB/ton during the trading session on October 10th, marking the highest level in nearly 11 months. However, due to lack of driving force, the price failed to consolidate and quickly declined. Currently, the China market is in the peak season for consumption, and the aluminum ingot inventory is at a low level, providing strong support for aluminum prices. It is expected that the future trend of Shanghai aluminum prices will mainly be sideways to higher.

The China electrolytic aluminum market has shown the characteristics of "slight decrease in production compared to the previous month, but an increase in the ratio of aluminum to molten aluminum and expansion of operating capacity". Relevant data shows that in September, the output of electrolytic aluminum was 3.6148 million tons, a year-on-year increase of 1.14% and a month-on-month decrease of 3.18%. The structural changes are more significant, with the ratio of aluminum to molten aluminum increasing by 1.2 percentage points month-on-month, to 76.3%, resulting in a year-on-year decrease of 8.67% in the amount of ingot produced, to 8.57 million tons. In terms of capacity, as of the end of September, the industry's operating capacity was 44.06 million tons, achieving a month-on-month increase, mainly due to the gradual commissioning of replacement projects in Shandong and Yunnan and technological transformation projects in Guangxi. Entering October, the continuous progress of the above projects will drive the production to further increase. At the same time, with the strong support of the increase in the direct sales plan of molten aluminum in the north, the ratio of molten aluminum is expected to rebound by 1 percentage point, to 77.3%.

On the import side of aluminum, China's raw aluminum imports in August were 217,344.07 tons, a decrease of 12.26% compared to the previous month and an increase of 33.12% year-on-year. Russia remains the largest source of aluminum imports for our country. In August, China imported 138,114.07 tons of raw aluminum from Russia, a decrease of 27.39% compared to the previous month and an increase of 29.24% year-on-year, accounting for 63.55% of the total imports. This year, China and Russia signed a long-term contract for the import of 2.2 million tons of electrolytic aluminum.

During the National Day holiday, China aluminum ingot and aluminum bar inventories accumulated a total of 81,000 tons, an increase of 11.5%, which is basically in line with expectations. Recently, the social inventory of aluminum ingots in China has continued to grow slightly, mainly because the high price of aluminum has suppressed the enthusiasm of downstream buyers, and some small and medium-sized processing enterprises have reduced their purchases or postponed their orders due to cost pressure. Data shows that as of October 13, the inventory of refined aluminum in China's main markets was 642,000 tons, an increase of 0.8 tons compared to October 9, and 0.4 tons lower than the same period last year. In the first half of October, the inventory of refined aluminum remained stable at 650,000 to 680,000 tons. Due to the planned increase in the aluminum-water ratio, the supply pressure of aluminum ingots was not great. In the second half of the month, the inventory of refined aluminum is expected to turn to the channel of inventory reduction.

In September, due to the decline in alumina prices, the production cost of China refined aluminum decreased. Relevant data show that in September, the average tax-inclusive full cost of the China refined aluminum industry was 16,488 RMB/ton, a decrease of 1.37% month-on-month and a decrease of 6.58% year-on-year. Although the alumina price declined in September, the spot price of refined aluminum was mainly consolidating at a high level, and the profit of refined aluminum was mainly volatile. In September, the average profit of the China refined aluminum industry was 4,340 RMB/ton, an increase of 8.63% month-on-month.

Entering October, from the perspective of cost changes, it is expected that the spot price of alumina will be weak under the backdrop of oversupply, and the power cost will mainly remain stable. In terms of auxiliary materials, the price of pre-baked anode will rise slightly, while the price of aluminum fluorine will increase significantly due to the rise in raw material fluorite, which will jointly push up the cost of auxiliary materials. Overall, despite the upward pressure on the cost of auxiliary materials, the total cost of refined aluminum is still expected to decrease in October, dominated by the downward trend of alumina prices. It is expected that the average value of the tax inclusive full cost of China refined aluminum industry in October will be between 15,800 RMB and 16,200 RMB/ton.

At present, the comprehensive governance of "involution" in the automotive industry has made positive progress, and the production and sales of the automotive market in September showed a good trend. According to the statistical data of the China Association of Automobile Manufacturers: In September, the production and sales of automobiles in China were completed at 3.276 million and 3.226 million, respectively, a year-on-year increase of 16.4% and 12.9%, and a month-on-month increase of 17.1% and 14.9%; In September, the production and sales of new energy vehicles in China were completed at 1.617 million and 1.604 million, respectively, a year-on-year increase of 23.7% and 24.6%, and a month-on-month increase of 16% and 15%, and the new sales of new energy vehicles accounted for 49.7% of the total new sales of automobiles.

Later, against the backdrop of the orderly implementation of the "two new" policies, the expiration of the tax-exempt policy for new energy vehicles, and the rich supply of new products from enterprises, car consumption is expected to continue to grow. However, the complexity, severity, and uncertainty of the external environment still exist, and the industry's profit level will be under some pressure. The China Association of Automobile Manufacturers predicts that in 2025, the total sales volume of automobiles in China will reach 32.9 million units, a year-on-year increase of 4.7%, and the sales volume of new energy vehicles is expected to reach 16 million units, a year-on-year increase of 24.4%.

From a macro perspective, the China economy is stable and advancing, but the foundation for improvement still needs to be consolidated. It is expected that subsequent policy measures will coordinate efforts through moderately loose monetary policy and more proactive fiscal policy to focus on strengthening the China big cycle. At the same time, the global economic growth momentum has slowed down, and uncertainty has become the new normal. The direction of future tariff policies and their potential impact are key variables facing the global economy.

In terms of terminal consumption, the automotive industry has a relatively high prosperity level, and the fourth quarter will enter a period of production and sales rush, while orders related to the power grid are expected to accelerate, which will provide key support for aluminum consumption. Overall, it is expected that the price of aluminum in Shanghai will mainly be characterized by sideways and upward trends in the future, with the main contract facing resistance at 21130 RMB/ton and support at 20650 RMB/ton.

Editorial Note: China is not only the world’s largest producer of primary aluminum—accounting for over 57% of global output according to 2023 data—but also the largest producer and exporter of primary gallium. According to data from institutions such as the U.S. Geological Survey (USGS), China supplies approximately 80–95% of the world’s primary gallium. With mature gallium extraction technologies and a fully integrated aluminum industry, China holds a near-monopoly position in the global gallium supply chain. In July 2023, China imposed export controls on gallium and germanium, further highlighting gallium’s geopolitical strategic value and the fragility of its global supply chain.

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