Aluminum Prices Soars in China And Abroad

Why are aluminum prices soaring in China and abroad?

On January 5th, the price of aluminum on the Yangtze River rose by 840 yuan, on January 6th by 590 yuan, and on January 7th by 220 yuan, a total increase of 1430 yuan in three days, approximately USD 237.

The London price rose by a total of USD 184.5 from December 30th to January 6th.

The rise in aluminum prices is the result of a combination of factors, including macroeconomic sentiment, structural changes in supply and demand, cost support, and industry substitution effects.

Let's explain it in simple words:

1.The supply chain is facing bottlenecks, making it difficult to increase production: To protect the environment and achieve its "dual carbon" goals, the government has set a "ceiling" on the production capacity of electrolytic aluminum (a core stage in aluminum production), limiting the total to around 45 million tons per year. This capacity is now almost fully utilized. This is like a popular restaurant with a limited number of seats; no matter how many people want to eat there, the owner can't simply add more tables. This situation isn't unique to China; abroad, due to high electricity costs and energy crises, aluminum plants have either shut down or are finding it difficult to expand production.

2.The demand for aluminum has a "new engine," making it even stronger than before: previously, aluminum was mainly used in building houses and making doors and windows, but that demand is no longer as strong. However, new industries such as new energy vehicles, photovoltaic power generation, ultra-high voltage power grids, energy storage batteries, and AI data centers have become major consumers of aluminum. For example, to make electric vehicles travel further, a lot of aluminum is used in the car body to reduce weight; the frames of photovoltaic panels and the casings of energy storage batteries also require a large amount of aluminum. These new demands are growing rapidly, completely offsetting the decline in aluminum used in construction.

3. Substituting aluminum for copper has become more cost-effective: Copper prices have risen more sharply than aluminum prices, and the money needed to buy one ton of copper can now buy more than four tons of aluminum. In many applications where extreme performance is not required (such as some electrical wires and cables), using aluminum instead of copper can save a lot of money. This "substitution effect" has created additional demand for aluminum.

4. Costs are quietly increasing: Producing aluminum is very energy-intensive. Currently, data centers (such as the server rooms that support our internet access, gaming, and AI applications) are being built across the country, and they also consume a lot of electricity. They are competing with aluminum factories for electricity, which could lead to higher electricity prices in the future and drive up the production costs of aluminum. Therefore, on one hand, production is "locked" by policies and power supply limitations, making it difficult to increase significantly; on the other hand, the demand for aluminum from new sectors such as new energy vehicles, solar power, power grids, and AI is growing rapidly, coupled with the additional demand driven by the fact that "aluminum is cheaper than copper." This situation of "limited supply and high demand" naturally pushes up the price of aluminum.

Shanghai Mengjiang Aluminum has produced aluminum foil for 17 years, welcome to contact us via whatsapp:8613661547963 or email: inquiry@cnaluminiumfoil.com.