Shanghai aluminium posts biggest rally since April as stocks run low

what happened

Reuters reports that aluminium futures on the Shanghai Futures Exchange recovered some ground on Thursday, with the December contract up 1.86% at 22,700 yuan per ton, roughly $3,403. The intraday gain reached its strongest level since April 16, after two sessions of losses that had pushed the contract to an 11-month low.

Thin physical supply is the main driver. Shanghai stocks fell more than 30% in a single week to 132,605 tons, the lowest since January, while LME inventories have roughly halved since the US-Israeli conflict with Iran began. Most of the remaining metal on the LME is Russian. The spread between cash and three-month LME aluminium widened to $151.50, the highest in 30 years, and the near-term premium on the SHFE stayed near 300 yuan.

Jinrui Futures analysts said restocking by Chinese buyers after a recent drop, together with tight nearby supply, could lift prices briefly. They warned, however, that new smelting capacity overseas and softer demand expectations may weigh on prices later on.

why it matters

The steep backwardation and shrinking stocks point to a real shortage of physical metal right now, yet new capacity outside China and weaker demand limit how far prices can climb. Other base metals were largely flat, with LME copper down 0.54% and tin off 0.58%.

market impact

Aluminium: tight nearby supply supports prices short term, while new overseas capacity is a drag later

• ↔Aluminium SHFE mixed — tight nearby supply supports prices, but new smelting capacity could pressure them later

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