Aluminium falls 1.4% as easing Hormuz restrictions raise supply expectations

Aluminium prices declined by 1.4 per cent to INR 320.25 (USD 3.37) as easing restrictions on passage through the Strait of Hormuz reduced concerns over supply disruptions in the Gulf region. According to Kedia Advisory, the decline also reflected expectations of recovering smelter operations, higher Indonesian production and rising Chinese exports.

The softer price outlook comes despite falling visible inventories, which continue to provide underlying support to the market. Aluminium exports from Indonesia exceeded 150,000 tonnes in August, while Chinese aluminium exports increased by 17.2 per cent year on year, adding to expectations of improved global availability.

According to Citi, accelerating supply growth outside China could shift the global aluminium market from a deficit of 941,000 tonnes in 2026 to a surplus of 1.8 million tonnes in 2027. Macquarie also lowered its forecast for the 2026 global market deficit to 820,000 tonnes, citing faster-than-expected restarts of Middle Eastern smelters.

Macquarie predicted average aluminium prices of USD 3,050 per tonne in 2027, compared with USD 3,325 per tonne in 2026.

Aluminium supply outlook improves as Gulf smelters recover

The easing of passage restrictions through the Strait of Hormuz and the gradual recovery of smelter operations have improved expectations for aluminium supply from the Gulf. However, regional production remains under pressure.

Global aluminium production declined by 1.5 per cent year on year in August, while Chinese refined aluminium output rose by 3 per cent to a record 3.87 million tonnes. In contrast, production across the Gulf Cooperation Council (GCC) fell by 43 per cent year on year to 299,000 tonnes, highlighting the continuing impact of regional supply constraints.

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Improved availability has also been reflected in physical-market premiums. Japanese buyers agreed to pay premiums of USD 255 per tonne for October-December shipments, a reduction of 35 per cent from the previous quarter. The decline indicates improved supply availability for buyers in the region.

China's unwrought aluminium and semi-finished product exports reached 643,000 tonnes in July, up 18.6 per cent year on year. Cumulative exports during January–July increased by 16.7 per cent to 4.04 million tonnes, adding to the supply expected to reach international markets.

Falling inventories offer underlying price support

Despite expectations of rising supply, inventory movements point to tighter availability in some markets. Inventories on the Shanghai Futures Exchange fell by 7.8 per cent from the September 30 report, while London Metal Exchange stocks declined by 15,575 tonnes.

These reductions have provided underlying support to aluminium prices, even as recovering Gulf production and higher exports from Indonesia and China have weighed on market sentiment.

The competing signals leave the market balancing the prospect of improved supply against continuing regional production constraints and declining visible stocks. The outlook will depend partly on the pace at which Gulf smelters return to operation and additional metal becomes available to international buyers.

Aluminium futures show signs of long unwinding

Technical indicators point to long unwinding in the aluminium futures market. Open interest declined by 7.67 per cent to 3,610 contracts alongside a price decrease of INR 4.55 (USD 0.48).

Kedia Advisory identified support at INR 317 (USD 3.34), below which prices could test INR 314 (USD 3.31). Resistance was placed at INR 325.50 (USD 3.42), with a sustained move above that level potentially opening the way towards INR 330.50 (USD 3.48).

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