Aluminium inventories in China have climbed above 1.3 million tonnes, reaching their highest level since 2020 as weak domestic demand coincides with tightening global supply linked to escalating tensions in the Middle East. 

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Inventories are piling up, even as factories enter the busy period that follows the Lunar New Year holiday. The sluggish performance of a highly used industrial metal could be a warning for the Chinese economy, which is also facing a crisis due to elevated energy costs and other disruptions due to the Middle East conflict.

Despite the post-Lunar New Year demand season, Chinese downstream sectors, including construction and manufacturing, have remained subdued, with buyers limiting purchases to immediate requirements in response to elevated prices.

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Even so the operating rates at the fabricators are high since the lunar holiday, overall demand remains quiet compared to the previous year, pointed out Howard Lau, China materials analyst at HSBC Holdings Plc..

Inventories of semi-finished products are around 600,000 tons, about 75 per cent of last year’s level, according to Mysteel.

The divergence between global and domestic markets has widened, with LME prices rising faster than those in Shanghai, creating favourable export conditions for Chinese producers. 

China’s exports of unwrought aluminium and aluminium products increased by 13 per cent in the first two months of 2026, as producers moved to offload excess inventory into overseas markets, which would be welcomed in the coming months, considering the shortfall in the Middle Eastern supplies. 

The development underscores a growing market imbalance, where geopolitical disruptions are constraining global supply, while China faces rising inventories due to demand-side weakness, potentially accelerating export flows in the near future. 

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