In H1 2026, SHFE aluminium prices followed a "higher earlier, lower later" trajectory. In Q1, macro expectations for US Fed interest rate cuts intertwined with Middle East geopolitical conflicts, driving aluminium prices to surge to historical highs. Entering Q2, as the US strong-dollar policy stance was confirmed, Middle East supply disruptions marginally eased, and domestic downstream consumption in China entered the off-season, the aluminium price centre continued to shift lower.
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Looking ahead to H2, macro headwinds from a strong US dollar and overseas liquidity concerns will continue to weigh on nonferrous metals valuations. Supply side, high aluminium prices are stimulating capacity release; China's operating capacity is expected to continue rising M-o-M, while newly commissioned capacity in the Middle East and Indonesia ex-China gradually ramps up.
Demand side, the pace of domestic demand recovery remains mild, and while aluminium semis export orders on hand can still provide a floor, expectations for new orders are weakening. Overall, the SHFE aluminium price centre is expected to move further down in H2, with the full year exhibiting a "higher earlier, lower later" pattern.
H1 2026 SHFE aluminium market review (by phase)
Q1: Macro and geopolitical dominance, aluminium prices retreat after rapid rise
In Q1 2026, SHFE aluminium price movements were primarily driven by macro factors and overseas supply disruptions, with seasonally weak fundamentals becoming a secondary concern.
January: Macro interest rate cut expectations and capital inflows pushed aluminium prices higher
- Fundamentals: The Chinese New Year off-season, combined with a demand vacuum, led to a continuous buildup of aluminium ingot social inventory. By end-January, SMM aluminium ingot social inventory had risen to 782,000 tonnes, the highest for the same period in nearly three years. High aluminium prices squeezed downstream profit margins, causing some processing enterprises to reduce operational willingness, and procurement demand for primary aluminium weakened.
- Macro front: The US Fed was in an interest rate cutting cycle, the US dollar index weakened significantly, and massive capital flowed into commodity futures markets. Coupled with supportive domestic consumption promotion policies, these factors jointly underpinned aluminium prices. In January, the average SMM A00 aluminium price was about RMB 24,086 per tonne, the highest monthly average in H1.
February: Cooling rate cut expectations, aluminium prices consolidated on a weak note
- Fundamentals: The Chinese New Year holiday caused a sharp drop in procurement demand from downstream processing enterprises, while aluminium smelters' willingness to cast ingots increased, leading to further accumulation of aluminium social inventory. After the Chinese New Year, SMM aluminium ingot social inventory rose to 1.108 million tonnes, and the elevated inventory level made it difficult to provide effective upward support for aluminium prices.
- Macro Front: Cooling rate cut expectations in the US pushed the US dollar index higher, and profit-taking capital outflows triggered a pullback in aluminium prices, reinforcing the weak consolidation trend. In February, the average SMM A00 aluminium price retreated to RMB 23,385 per tonne, down about RMB 700 per tonne M-o-M.
March: Repeated tug-of-war between Middle East supply disruptions and demand-side restraint
In March, the market’s core trading narrative repeatedly swung between supply-side disruptions in the Middle East and demand-side restraint, intensifying the tug-of-war between longs and shorts and driving aluminium prices into a volatile "surge—pullback—rebound" pattern.
- Supply side: Production cut events overseas occurred frequently. Mozal shifted into maintenance mode; Qatar Aluminium maintained a 60 per cent operating rate and halted further production cuts; Aluminium Bahrain idled lines 1, 2, and 3, with potential for more cuts; EGA’s aluminium smelter facilities suffered severe damage, with market expectations of large-scale production cuts. According to SMM estimates, including cuts at the Mozambique aluminium smelter, nearly 4 million tonnes of aluminium capacity outside China had been taken offline. Sustained concerns over tightening supply outside China became the core driver behind periodic price rises.
- Geopolitical risks: The Middle East conflict continued to escalate and the shipping safety of the Strait of Hormuz drew broad market attention, injecting persistent geopolitical risk premiums into aluminium prices.
- Demand side: Stagflation worries heightened and risk-off sentiment emerged; high aluminium prices curbed downstream procurement, while elevated energy and freight costs squeezed processing enterprise profitability, indirectly restraining the release of demand.
In March, the SMM A00 aluminium average price rebounded to RMB 24,386 per tonne, the second-highest monthly average level in H1, but with markedly wider consolidation.
Q2: Expanding supply and marginally weakening demand shifted the aluminium price centre lower
In Q2, as high aluminium prices spurred higher capacity utilisation rates in China and the impact of overseas production cuts was gradually absorbed, market attention shifted back to China’s fundamentals. The centre of SHFE aluminium dropped from around RMB 24,665 per tonne in April to roughly RMB 23,769 per tonne in June, briefly dipping to the RMB 22,665 per tonne level in late June, a fresh low for the year.
- Supply side: High prices prompted aluminium enterprises to raise capacity utilisation rates, boosting China’s production; the impact of production cuts in Mozambique and the Middle East gradually materialised, weakening the SHFE/LME price ratio. From June to July, resumption expectations emerged for curtailed capacity in the Middle East, and new Indonesian projects began being energised and ramping up, heightening expectations of growing aluminium supply outside China. Domestically, according to market communication, China’s aluminium production posted around a 3.5 per cent Y-o-Y growth rate in January-May.
- Demand side: High prices weighed on end-use demand in China, but with LME outperforming SHFE, aluminium semis exports increased, supporting domestic primary aluminium demand. According to General Administration of Customs data, China’s cumulative exports of unwrought aluminium and aluminium semis over January-May totalled 2.685 million tonnes, up 10.4 per cent Y-o-Y. April alone saw monthly exports of 598,000 tonnes, a more-than-one-year high; May exports were 632,000 tonnes, a Y-o-Y increase of 15.5 per cent. Strong performance in aluminium semis exports effectively filled the gap in China's domestic consumption.
- Inventory side: Q2 saw significant destocking in the market. Social inventory peaked at 1.465 million tonnes in early May and declined to 1.165 million tonnes by end-June, a cumulative destocking of around 300,000 tonnes. The destocking pace steepened markedly, with weekly warehouse withdrawals spiking to 170,000 tonnes at one point, a new high for single-week withdrawals in nearly four years.
Analysis of supply-demand fundamentals
Supply side: High margins boosted operating rates while new projects ramped up, keeping aluminium supply ample in H1
- In H1 2026, persistently high industry smelting margins significantly amplified output elasticity, serving as the core driver behind ample supply in the first half. On one hand, strengthening aluminium prices kept per-tonne profit in a healthy range, driving aluminium enterprises to run at maximum operating rates. On the other, new projects that started from end-2025 through H1 2026 progressively ramped up to contribute steady incremental volumes month by month. Continuously realised incremental supply from new capacity ramp-ups further supported domestic primary aluminium output. Driven by these two factors, China's total aluminium production rose steadily in H1, keeping raw material supply broadly ample.
Demand side: weak domestic demand, with exports providing critical support
In H1 2026, China's aluminium demand showed a structural divergence between "weak domestic, strong external" demand. Elevated aluminium prices continuously suppressed downstream purchases, while aluminium semis exports benefited from a recovering SHFE/LME price ratio and performed strongly.
According to China Customs data, China exported 1.435 million tonnes of aluminium semis in January-May 2026, up 13.7 per cent Y-o-Y; May exports alone reached 320,000 tonnes, up 14.7 per cent Y-o-Y. Aluminium semis exports stayed high in the first five months, effectively supplementing domestic channels for absorbing primary aluminium.
Behind the high growth in aluminium semis exports, the core driver was the "LME outperforms SHFE" pricing dynamic: overseas supply tightness expectations due to factors such as Middle East production cuts, while in China high inventory pressure kept the SHFE/LME price ratio weakening, creating a notable profit window for aluminium semis exports.
Inventory: H1 buildup to multiyear highs, rapid destocking kicked off in Q2
In H1 2026, China's aluminium social inventory passed through three stages: "rapid buildup—consolidating at highs—steep destocking". Early in the year, inventory accumulated amid Chinese New Year off-season and demand suppression from elevated prices, reaching a recent-year high of 1.465 million tonnes in early May. Subsequently, with downstream resumption and export volumes ramping up, inventory began rapid destocking. The destocking slope steepened markedly in Q2. The core reason behind the accelerated destocking was the concentrated release of aluminium semis exports combined with a concentrated release of downstream restocking demand after production resumption.
H2 Outlook
Macro Front: Strong US dollar suppresses valuations
- The US maintains a strong dollar policy stance, and the US dollar index fluctuating at highs will continue to suppress valuations of non-ferrous metals.
- The geopolitical risk premium in the Middle East is gradually fading, shipping expectations in the Strait of Hormuz are improving, and concerns about liquidity outside China are easing, which will pose a bearish factor for aluminium prices in the medium and long term.
Supply Side: New investments and production resumptions outside china advance together
- In markets outside China, some projects in the Middle East have been gradually resuming production, and the pace of commissioning new capacity and capacity ramp-up outside China has accelerated.
Demand Side: Support from export orders weakens
In the short term, orders on hand can still underpin aluminium semis exports. However, as the price spread between Chinese and overseas markets narrows, expectations for new export orders for some aluminium semis are starting to weaken. Medium and long-term export growth faces downside risks. Key focus should be on peak-season consumption in China and changes in export orders.
Overall Assessment
Overall, the SHFE aluminium market in H2 2026 will face dual pressures from “macro headwinds and supply release.”
