Aluminum prices rose by 2.09% in December

Aluminum prices rose in December. According to SunSirs' commodity price analysis system, as of December 30, 2025, the average price of domestic aluminum ingots in the East China market was 22,193.33 RMB/ton, an increase of 2.09% compared to the average market price of 21,740 RMB/ton on December 1st.

In December 2025, aluminum prices continued the upward trend seen at the end of October, repeatedly reaching new annual highs. Meanwhile, the price of alumina, a key raw material, declined from its high levels, resulting in relatively favorable profit margins per ton of aluminum. The strong performance of aluminum prices in December was primarily driven by a combination of factors, including rigid supply constraints, strong demand from the new energy sector, rising cost floors, and positive macroeconomic and market sentiment. The price resilience during the off-season exceeded expectations due to these multiple factors. The specific reasons were as follows:

1. Supply side: Red lines (strict regulations) + structural contraction, limiting incremental suppl

Rigid constraints on production capacity: The domestic electrolytic aluminum production capacity ceiling of 45 million tons remainsed unchanged, with operating capacity in December at approximately 44.1 million tons, resulting in a capacity utilization rate exceeding 97%. New replacement projects only amounted to 650,000 tons, and most were scheduled for commissioning in 2026, meaning there will be no significant increase in capacity in the short term.

Power and weather disruptions: Insufficient hydropower generation in Yunnan and Guangxi had led to production cuts at some companies, and transportation in parts of Xinjiang had been temporarily disrupted. Coupled with environmental regulations, operating rates remained high but marginal increases were limited.

Import window closed: The price difference between domestic and international markets showed a "stronger overseas market and weaker domestic market," leading to a month-on-month decrease in import volume in December. Overseas producers in Europe and the United States continued to reduce production due to high energy costs, resulting in low LME inventory levels and a continued tight global supply situation.

2. Demand side: Strong growth in new energy sectors provided support, while traditional industries showed marginal improvement

The surge in demand for new energy sources: the lightweighting of new energy vehicles, accelerated construction of ultra-high voltage power lines, and growth in photovoltaic installations were driving a 12%-15% year-on-year increase in demand for aluminum cables and aluminum body panels, making them a core engine of demand.

Resilience in traditional sectors: The decline in aluminum use in the construction sector had narrowed, automotive exports maintained high growth, and orders for aluminum rods, plates, strips, and foils were showing a marginal recovery, supporting overall consumption stability.

Low inventory levels reinforce expectations: LME aluminum inventories remained low, and although inventories at major ports in East China had increased, the growth rate had slowed. The expectation of further inventory reductions supported prices.

3. Cost side: Alumina and electricity costs were rising in tandem, pushing up the cost base

Alumina prices stopped falling and were rising: After mid-December, due to rising bauxite import costs and a decline in operating rates, alumina prices rebounded from 2,480 RMB/ton to 2,600 RMB/ton, raising the cost line for electrolytic aluminum production.

Rising electricity costs: Thermal power companies were affected by the rebound in coal prices, leading to an increase of approximately 300-500 RMB/ton in electricity production costs.  Hydropower companies in Yunnan and other regions were also experiencing higher electricity prices during the dry season, further strengthening cost support.

Carbon cost expectations: The impending implementation of the EU's CBAM policy is expected to push up the long-term cost curve for global aluminum companies, providing implicit support for prices.

4. Macroeconomics and Funding: Weaker US dollar + loose liquidity

Expectations for a Federal Reserve interest rate cut were rising: the December FOMC meeting signaled potential rate cuts in 2026, causing the U.S. dollar index to fall below the 101 mark, making dollar-denominated aluminum prices more attractive.

Domestic liquidity was abundant: The central bank's reserve requirement ratio cut in December released 1.2 trillion RMB in funds, leading to a valuation recovery in cyclical sectors.

Driven by copper prices: Copper prices broke through 100,000 RMB/ton, and with expectations of a recovery in the copper-aluminum price ratio, aluminum prices followed suit with a compensatory increase.

5. Inventory and Expectations: Low inventory provided support, and the pressure from inventory accumulation was marginally manageable

Domestic inventories at major ports in East China were approximately 610,000 tons, a 9.1% increase compared to the previous period. However, due to expectations of supply contraction, the rate of inventory accumulation had slowed. Outbound shipments increased in late December, preventing inventory pressure from significantly suppressing prices.

LME inventories remained at a low level for this time of year, and the low inventory situation overseas remained unchanged, supporting an upward trend in global aluminum prices.

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