Recently, domestic aluminum prices have continued to strengthen, and the cumulative increase in inventory has significantly expanded. According to Mysteel data, as of December 29, 2025, China's spot inventory of electrolytic aluminum was 638,000 tons, an increase of 48,000 tons compared with November 27, 2025. During the New Year's Day holiday in 2026, inventory increased by 65,000 tons to 703,000 tons. On the surface, the combination of "rising prices + increasing inventory" is likely to trigger market concerns about the deterioration of supply and demand. However, from the perspective of structure and rhythm, the current round of inventory rebound is more due to the phased suppression of the demand side caused by the excessively rapid rise in aluminum prices, rather than a reflection of long-term oversupply.

Price increase and regional disruptions

Purchasing sentiment for primary processed products weakens

Recently, the price of aluminum has been rising relatively rapidly, and market sentiment has shifted to cautious wait-and-see. After the rapid upward movement of aluminum prices, the profit margins of downstream processing links have been significantly compressed, and enterprises' willingness to purchase primary aluminum has accordingly weakened. Currently, the market is more likely to hedge against fluctuations in primary aluminum prices by consuming finished product inventories in factories rather than actively replenishing inventories. According to Mysteel statistics, as of December 31, 2025, the weekly output of primary processed products was 610,000 tons, a decrease of 12,000 tons from the end of November 2025; while the finished product inventory in factories was 222,000 tons, a decrease of 25,200 tons, reflecting that the processing end is clearly characterized by destocking to cope with high-priced raw materials. As factory inventories fall to a low level, the acceptance of primary processed products for aluminum prices will gradually increase.

Since December 2025, central China has been continuously affected by environmental protection controls. Some local aluminum processing enterprises have been forced to limit production or even suspend production periodically. The demand for spot purchases in the region has shrunk significantly, which has formed a periodic drag on the surrounding markets. According to Mysteel statistics, as of January 5, the spot inventory in Gongyi area reached 138,000 tons, an increase of 56,000 tons compared with November 27, 2025, showing a prominent regional inventory accumulation feature. With the gradual relaxation of environmental protection production restriction measures after the Spring Festival, relevant processing enterprises are expected to resume production one after another, and there is an expectation of phased recovery on the demand side. Overall, the recent significant increase in social inventories of aluminum ingots is not due to a substantial decline in demand, but a short-term phenomenon caused by the slowdown in procurement rhythm under the high-price environment and the combined effect of regional environmental protection disturbances.

Terminal demand has marginally declined

Price transmission is blocked

Against the backdrop of high demand growth in the early part of 2025, recently, there have been signs of a phased cooling on the demand side. Orders in the photovoltaic sector have declined month-on-month from their high levels. In December 2025, domestic automobile production and sales weakened month-on-month, leading to a slight drop in overall demand. At the same time, the transmission of high aluminum prices to the prices of end products is not smooth, and end customers have limited acceptance of high prices, resulting in a more cautious order placement rhythm, which has exerted a certain restraint on aluminum product output and further weakened the momentum of primary aluminum inventory destocking. In addition, the Shanghai-London aluminum price ratio remains at a low level, and the export price advantage is insufficient. Aluminum product export orders continue to run weakly, further dragging down the demand side. According to Mysteel's data calculation, in December 2025, the apparent demand for primary aluminum was 3.918 million tons, a year-on-year decrease of 0.45%, and the average daily consumption dropped by 0.19% month-on-month. Generally speaking, the current weakness on the demand side is mainly reflected as a phased contraction under the combined effect of seasonal factors and the high-price environment. As prices gradually return to a reasonable range and production activities and orders resume after the Spring Festival, the demand side still has a basis for recovery and does not constitute a trend-like decline.

Marginal increase on the supply side

Increased ingot casting leads to periodic pressure on inventories

The amount of ingot casting has increased slightly, putting certain pressure on inventory. On one hand, affected by the decline in orders for primary processed products, the proportion of molten aluminum has decreased slightly compared with the previous period, and more output has flowed into the spot market in the form of ingots, promoting the visibility of social inventory. According to Mysteel's research, as of December 31, 2025, the weekly consumption of molten aluminum was about 540,000 tons, a decrease of 10,000 tons from the end of November 2025. On the other hand, the newly commissioned production capacity in Inner Mongolia and Xinjiang has been gradually released, driving a marginal increase on the supply side. As of December 31, 2025, China's operating capacity of electrolytic aluminum was about 44.68 million tons, an increase of 40,000 tons from the previous period. Against the background that the slight increment on the supply side continues to be released and the demand side weakens periodically due to seasonal factors, the periodic accumulation of aluminum ingot inventory is somewhat inevitable.

Currently, the increase in inventory should be more understood as a phased mismatch between supply and demand against the backdrop of the rapid rise in aluminum prices, rather than a signal that the long-term supply and demand pattern has substantially deteriorated. In the short term, with aluminum prices continuing to rise and demand falling off in a phased manner, there is still the possibility of further accumulation of social inventory. In the medium to long term, on the premise that the supply side is generally constrained and the room for new production capacity to be released is limited, the demand structure continues to tilt toward new energy, power grids and other fields. The medium to long-term supply and demand pattern of the aluminum market remains tight, and the price operation center has strong support.

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