FX.co ★ Aluminum Near 3-Year Highs on Supply Strains

Aluminum futures in the UK have risen to approximately $3,190 per tonne, marking a third consecutive session of gains and nearing a three-year peak. This price increase has been driven by a tightening supply among major producers. In China, authorities have reaffirmed their commitment to curbing overcapacity in the metals sector to alleviate deflationary pressures, with production expected to exceed the 45-million-ton limit this year. This has led smelters to plan for restrained growth by 2026. Efforts by Chinese companies to expand smelting operations in Indonesia have encountered challenges due to rising energy costs and regulatory uncertainties. Meanwhile, elevated power prices, equipment failures, bauxite shortages, and geopolitical tensions have caused production shutdowns in Iceland, Mozambique, and Australia. Despite these obstacles, demand remains robust, fueled by the electric vehicle sector, renewable energy initiatives, and investments in power grid infrastructure. Moreover, exchange inventories remain near multi-year lows, heightening the sensitivity to supply disruptions and maintaining firm aluminum prices.