Why aluminium prices are rising and what to expect next

Economic Times

2 hours ago

Hareesh V, Head of Commodities, Geojit Investments
ADVERTISEMENT Aluminium, an essential component of modern industry, plays a vital role in sectors ranging from construction and transportation to packaging and renewable energy. As of June 2025, aluminium prices are trading between $2,450 and $2,600 per ton in the key London Metal Exchange. The recent uptick—about 10–15% since January —is largely driven by renewed US-China tariffs, supply chain disruptions, and rising energy costs. The imposition of higher tariffs on aluminium imports into the US, aiming to protect domestic producers, led to a surge in commodity prices that contributed to global price volatility.
Over the past decade, the aluminium market has experienced significant shifts driven by geopolitical tensions, energy prices, and evolving demand patterns—particularly influenced by China, the world's largest producer and consumer.
China, which accounts for nearly 60% of global aluminium output, is experiencing a slowdown in manufacturing activity. A recent contraction in its manufacturing sector has raised concerns about reduced demand from the world's largest commodity consumer. Over the past decade, China's aluminium output has surged, supported by state-backed investments and a robust manufacturing base. However, environmental policies and energy constraints have recently led to production curbs, especially in coal-intensive regions.
ADVERTISEMENT In 2025, China's aluminium demand is expected to remain relatively stable, with modest growth in the construction and EV sectors offset by a slowdown in real estate and exports. Meanwhile, supply-side reforms and energy transition policies are likely to keep production growth in check, contributing to tighter domestic balances and increased reliance on imports.Globally, aluminium supply and demand have seen moderate growth over the last ten years. From 2015 to 2024, global aluminium demand grew at an average annual rate of 2.5%, driven by increased consumption in electric vehicles, infrastructure, and green technologies. However, supply growth has been constrained by environmental regulations, energy costs, and geopolitical disruptions.
ADVERTISEMENT Aluminium prices have been notably volatile in the past decade. In 2015, prices hovered around $1,600 per metric ton, reflecting oversupply and weak demand. Prices gradually recovered, peaking above $3,000 per ton in 2021 amid post-pandemic stimulus and supply chain disruptions. Since then, prices have fluctuated due to macroeconomic uncertainty, energy costs, and trade tensions. Global aluminium mine supply has experienced moderate growth in recent years, due to rising demand for lightweight, sustainable materials and the global energy transition. However, geopolitical tensions, environmental concerns, and regulatory changes continue to pose risks to supply stability. In 2025, mine supply is expected to remain tight due to delays in new project developments and logistical challenges.
ADVERTISEMENT Looking ahead, aluminium prices are expected to remain volatile through the rest of 2025. Amid persistent geopolitical tensions, constrained supply from China, and growing demand from alternative markets like India and the Middle East are likely to keep prices firm in the second half of this year.
However, downside risks remain. A potential global recession, weakening industrial output, and high interest rates could dampen demand and exert downward pressure on prices. Aluminium's strategic importance continues to grow, but the market faces a complex mix of opportunities and challenges. While long-term demand remains strong, especially from green industries, short-term volatility driven by macroeconomic and geopolitical factors will likely define the aluminium landscape in 2025.
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(The author Hareesh V. is head of Commodities, Geojit Investments. The views expressed are personal.)
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