Prospects for aluminium mixed on trade tensions, slack demand

FILE PHOTO: Aluminium blocks are seen in Gradacac, Bosnia and Herzegovina February 8, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
| Photo Credit:
Dado Ruvic

Prospects for aluminium look mixed, with some analysts maintaining their price forecast for now and others anticipating a fall because of trade tensions and slack demand.

“We are maintaining our 2025 aluminium price forecast at an annual average of $2,580/tonne for the time being. While we now forecast a looser balance than previously anticipated, the market will remain relatively tight, providing room for price growth,” said research agency BMI, a unit of Fitch Solutions. 

“Easing global monetary conditions are expected to keep aluminium prices elevated in the first half of the outlook period. The LME aluminium spot price is forecast to average about $2,600 a tonne in 2025 and 2026,” said Australia’s Office of the Chief Economist (AOCE). 

Down 4% this year

The World Bank, in its Commodity Outlook, said: “Aluminium prices are projected to drop by 10 per cent in 2025 (year-on-year) and a further 3 per cent in 2026, as the softening demand outlook outweighs limited increases in production.” 

J.P. Morgan Research has forecast an average price of $2,200/tonne for aluminium in the second quarter of 2025. “The global demand forecast for aluminium has been reduced to 1 per cent growth year-over-year, down around 1 per cent compared to previous estimates. This would create a surplus of around 200,000 tonnes in 2025,” it said.

Currently, the three-month aluminium contract on the London Metal Exchange (LME) is ruling at $2,443 a tonne. Prices of the metal, used in aircraft, cars, roofing, cans, and electrical applications, have declined by four per cent this year. 

BMI said the decline will primarily be due to the US tariffs imposed on March 12. Despite the initial impact of the tariffs, aluminium prices have demonstrated resilience, recovering from the year-to-date low of $2,316/tonne seen on April 9, closing at $2,456/tonne on May 22. “Prices have averaged $2,554/tonne in 2025 thus far, above the 2024 annual average of $2,458/tonne,” it said. 

Slower growth

The AOCE said on balance, price risks are skewed to the upside in the short term, with power vulnerability in China posing particular risks to aluminium production. “On 1 January 2025, 13 provinces in China issued drought warnings, with water levels at the Three Gorges Dam 6 per cent below the five-year average in the December quarter 2024,” it said.

Recently, heavy rains lashed the Three Gorges Dam region, leading to a rise in the storage level.

“We believe aluminium is likely to carry lower downside amplitude in the weeks and months ahead because it typically has higher elasticity of supply vs other metals,” said JP Morgan.

The World Bank said aluminium demand growth is expected to slow sharply over the next two years amid heightened trade tensions and decelerating global industrial activity, including the withdrawal of subsidies for new photovoltaic projects in China.

Downside risks

BMI conceded that US President Donald Trump’s policy shifts pose significant downside risks to demand, which could necessitate a downward revision of price forecasts in the coming months.

“We now anticipate the global aluminium market will transition into a modest surplus of 9,000 tonnes in 2025, following a projected deficit of 374,000 tonnes in 2024, looser than previously expected. This shift is driven by a more restrained global demand outlook,” the research agency said.  

The AOCE said downside risks to the short-term price forecast include trade actions and retaliatory measures.

The World Bank said global aluminium supply growth is set to weaken, as China, which accounts for 60 per cent of global aluminium production, nears a self-imposed 45 million tonnes output cap, introduced in 2017 to curb carbon emissions.  

According to the AOCE, primary aluminium production this year is expected to be 74.12 million tonnes (mt) compared with 71.92 mt in 2024 and demand 74.49 mt against 71.62 mt last year.

Published on May 31, 2025