With US tariffs and China’s cap curbing aluminium production and demand drives down LME prices, will buying interest return?

US tariffs are making their presence felt across the world, dampening aluminium demand as many producers are scaling back shipments in response to increased export duties imposed on them by the United States government. As a consequence, productions are becoming limited, notably reflected in the decline of primary aluminium output in North America, attributing to narrow profit margins as well. Tariffs, often a double-edged sword, are also pushing up end-user prices burdening consumers, weakening demand further.

In addition, aluminium production is constrained in China as it has already neared 45 million tonnes of cap, a limit imposed in 2017 to curb overcapacity. China is the world’s largest aluminium producer, including downstream and secondary. Limiting production also means restraining China’s raw material purchase, which is again reducing aluminium prices.

What it is ultimately leading to is decreased aluminium prices on the London Metal Exchange. Compared to the 8 per cent rally last year, the LME aluminium price is on downtrend this year by 2 per cent. Particularly, from March 12, when the US tariff came into effect, to May 15, the LME aluminium price has plunged by 9 per cent, standing at USD 2,480.5 per tonne. On the same day, last year, the benchmark price was at USD 2,577 per tonne – 4 per cent higher than the current price.