Driven by High Prices, Supply Accelerated While Demand Weakened; Post-Chinese New Year Inventory Peak Expected to Hit Five-Year High

Published: Jan 30, 2026 17:19

Source: SMM

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SMM January 30 News,

Starting in December 2024, capital inflows pushed SHFE aluminum prices to record highs. On January 30, 2026, the most-traded SHFE aluminum contract reached a highest price of 26,185 yuan/mt. In January 2026, the average SMM A00 aluminum ingot price recorded 24,085 yuan/mt, also hitting a historical peak.

Stimulated by high prices, global aluminum supply accelerated. Domestically, two new aluminum projects in Xinjiang and Inner Mongolia were energized and began production in December 2025 and are currently ramping up. Beyond these, production resumptions from idle capacity and capacity replacement projects may be encouraged, contributing to output earlier than planned. Overseas, there are signs that the planned commissioning and full production timelines for the Indonesian aluminum project may be brought forward. Under optimistic expectations, Indonesia's operating aluminum capacity is projected to reach around 2.3-2.5 million mt by the end of 2026.

Meanwhile, the dampening effect of high aluminum prices on downstream consumption is also evident. About two months before the 2026 Chinese New Year, social inventories of aluminum ingots in China began to accumulate. As of January 29, 2026, social aluminum ingot inventory reached 782,000 mt, up 330,000 mt YoY compared to the third week before the 2025 Chinese New Year holiday. The decline in the proportion of liquid aluminum nationwide far exceeded expectations, with total casting ingot volume in January increasing by 170,000 mt MoM from December. According to SMM estimates, the proportion of liquid aluminum in February is expected to drop by 7.7 percentage points MoM, and monthly casting ingot volume is projected to increase by another 170,000 mt MoM.

Considering historical inventory buildup trends, casting ingot volume expectations, and current price levels, SMM projects that if aluminum prices remain at current high levels and all ingots can be smoothly delivered to social warehouses, the peak social inventory of aluminum ingots in China after the 2026 Chinese New Year is expected to reach around 1.3-1.5 million mt, the highest in nearly five years. Post-holiday aluminum prices are likely to face significant inventory pressure.

However, it is important to note that if the Mozambique aluminum plant reduces or halts production as scheduled in March, the combination of positive news and macro tailwinds is expected to keep aluminum prices firm in the short term. Conversely, if the Mozambique aluminum plant successfully signs a new power contract, allowing production to continue, coupled with high inventory levels, aluminum prices both domestically and internationally may experience a pullback. It is essential to continuously monitor the commissioning progress of new aluminum projects in Indonesia, the production dynamics of the Mozambique aluminum plant, and the performance of domestic aluminum ingot inventories.

aluminum

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM‘s internal database model. They are for reference only and do not constitute decision-making recommendations.

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