Chinese Aluminum Smelters to Face Rising Power Costs, SMM Expects

[Geopolitical Risk Premium Exits Market, Aluminum Prices Under Short-Term Pressure and Volatility] On the macro front, the US and Iran have completed signing an electronic MOU. Expectations of geopolitical easing continue to materialize, market panic over the Middle East conflict continues to fade, and the geopolitical risk premium for commodities has weakened significantly. US May CPI rose 4.2% YoY, hitting a three-year high, while core CPI also strengthened. The market continues to bet on the Fed restarting rate hikes within the year, and expectations of tightening liquidity continue to suppress metal valuations. On the fundamentals side, the Middle East conflict caused involuntary production cuts in overseas aluminum capacity. Expectations of a global supply deficit continue to widen, and coupled with expectations of rising energy costs, this provides strong bottom support for LME aluminum. China’s inventory destocking trend has been established, and the destocking logic continues to be realized. The rebound in the proportion of liquid aluminum, support from export demand, and supply normalization compressing aluminum ingot formation—these three fundamental factors jointly drive the continuation of destocking. SMM maintains its forecast that inventory will fall to around 1.28 million mt by late June, and may further approach 1.2 million mt by end-June/early July, bringing some support to aluminum prices. However, the pressure from high domestic inventory remains relatively pronounced. Coupled with the currently bearish macro sentiment dominating the market, short-term domestic aluminum prices are mainly in the doldrums, with volatile adjustments.

According to foreign media reports, based on applications from multiple enterprises including Hindalco Industries and SRF Altech, India has decided to extend the anti-dumping duties on aluminum foil with a thickness of up to 80 microns imported from China, Malaysia, Thailand, and Indonesia until December 15, 2026. Previously, on September 29, 2025, the Directorate General of Trade Remedies (DGTR) of India's Ministry of Commerce and Industry had initiated a sunset review of aluminum foil imports from these four countries.

[SMM Aluminum Flash] The inventory of secondary aluminum ingot in major consumption areas in China stood at 24,600 mt, down 570 mt from the previous day, with the destocking pace picking up.