SHFE aluminum futures were nearly unchanged at ¥24,560/mt on June 26, reflecting a balanced domestic market where record production is being absorbed by steady demand. The contract has gained 1.7% over the past 7 days, modestly outperforming LME aluminum’s 6.94% decline over the same period.
China’s primary aluminum output reached a record 3.65 million tonnes in May, up 4.2% year-on-year. The increase was driven by smelter restarts in Yunnan province, where improved hydropower availability allowed roughly 800,000 tonnes per year of idled capacity to resume operations. Yunnan’s aluminum capacity utilization now stands above 85%, up from 65% in Q1.
Domestic demand has kept pace with the supply increase. China’s construction completions — the largest aluminum end-use — held stable in May after a Q1 decline. EV production reached 1.07 million units, absorbing aluminum sheet and extrusion orders. Solar panel installations added 18 GW in May, driving aluminum framing demand.
Export markets tell a more complex story. Chinese unwrought aluminum exports fell 12% year-on-year in May as Western tariffs and antidumping duties restricted access. The EU’s 22.1% dumping margin on Chinese aluminum extrusions, effective since March, continues to redirect Chinese metal toward domestic and Asian markets.
Shanghai aluminum inventory at SHFE warehouses fell 3.2% in the latest week to 218,000 tonnes, indicating that the domestic market is absorbing rather than accumulating the new supply. The backwardation in SHFE spreads suggests physical tightness persists despite record production.
Chinese aluminum is well-supplied and priced stably. For buyers sourcing from Chinese mills, the SHFE price is a reliable benchmark with minimal volatility. However, note that export restrictions and tariffs make cross-border procurement from China more costly — factor in duties and freight when comparing to LME-linked regional suppliers. Yunnan restarts could push domestic prices lower in Q4 if construction demand softens.