Aluminum Holds $3,200 as China Cap and 50% US Tariffs Lock in Structural Floor

LME aluminum settled near $3,198 per tonne on June 29, a modest gain that keeps the metal firmly above the $3,000 level it first breached in late 2025. Worthwill data shows the intraday range at $3,150 to $3,202.50, with LME registered warehouse stocks at 349,100 tonnes as of mid-June — historically low and reinforcing the physical tightness that has characterized the market since China imposed its production cap. SHFE aluminum traded at ¥24,360 per tonne, while the SHFE-LME arbitrage window showed an import loss of roughly $973 per tonne, effectively shutting the door on Chinese imports of foreign metal.

China's self-imposed 45-million-tonne primary aluminum capacity ceiling is the dominant structural force in the global market. The cap, combined with rising energy and emissions costs, has constrained Chinese output growth even as downstream demand from EVs, solar, and grid infrastructure accelerates. Alcircle data shows that while Indonesia is adding 705,000 tonnes of new primary capacity — taking its total to 1.4 million tonnes — roughly 70% of those shipments go to China, where they are absorbed by the very same supply constraint they were meant to relieve. The net effect: a market that was expected to show a 250,000-tonne surplus this year has seen that forecast shrink to just 80,000 tonnes, according to a Reuters analysts' poll cited by the International Aluminium Journal.

On the tariff front, the United States raised Section 232 aluminum import duties from 25% to 50% in June 2025, making the US the most expensive aluminum market globally. US Midwest delivery premiums hit a record $1,942 per tonne by November 2025, according to Expert Market Research. These tariffs have distorted trade flows: metal that would have gone to Asia or Europe is now routed toward US markets, tightening supply elsewhere and pushing up LME benchmark prices even for buyers who never touch US metal. The EU's Carbon Border Adjustment Mechanism (CBAM), now fully applied to aluminum imports from 2026, adds another layer of cost for carbon-intensive exporters shipping into Europe.

The Middle East conflict has injected a geopolitical risk premium into aluminum that did not exist a year ago. Argus reported in March 2026 that some analysts now see scenarios where LME aluminum surpasses all-time highs above $4,000 per tonne if disruptions to Middle Eastern producers persist. The region is not the largest producer globally, but in a market where the forecast surplus has already been whittled to 80,000 tonnes, any supply loss matters. Bahrain, the UAE, and Iran collectively produce several million tonnes annually, and shipping disruptions through the Strait of Hormuz would affect both metal and alumina flows.

Alumina and raw material costs remain elevated. China's removal of the 13% export rebate on 24 aluminum products, effective December 2024, raised effective alumina costs for export-oriented smelters and tightened semi-fabricated product availability outside China. The EU's expected scrap export tariffs, under discussion for spring 2026 implementation, would restrict secondary aluminum flows out of Europe, pushing more demand back toward primary metal and supporting LME prices. The aluminum market in mid-2026 is not just about supply and demand — it is being fundamentally repriced by policy intervention on three continents simultaneously.

The consensus among institutional forecasters puts 2026 LME aluminum in a $2,900 to $3,200 per tonne range, but that range already looks too low. The World Bank's April 2026 Commodity Markets Outlook projects $3,200 average for the year and $3,000 for 2027. But LME spot prices exceeded $3,200 before that report was published. Just2Trade notes a structural price floor "materially higher than pre-2025 levels" driven by deficits, tariffs, and energy cost inflation. The bear case — that Indonesian and other new capacity will ease tightness by H2 2026 — is plausible but unproven. Indonesian exports through October 2025 were 414,600 tonnes, up 71% year-over-year, a pace that must continue for a balance to be struck.