Macro perspective:

The Middle East turmoil triggered by a joint US-Israeli military strike on Iran became the biggest geopolitical black swan for the global primary aluminium market, potentially causing supply disruptions on the scale of millions of metric tons while also pushing up smelting costs. So far, the market’s main trading focus has remained on the geopolitical situation in the Middle East. From this week’s macro developments, Trump released signals of negotiations, but Iran clearly stated that its new supreme leader would not negotiate with him. There was no obvious easing in the US-Iran conflict for the time being, and concerns over energy and supply continued to be priced in. US February CPI data came in line with expectations, with inflation showing a steady cooling trend; however, against the backdrop of geopolitical conflict, divergence over the inflation outlook widened and uncertainty rose significantly.

Fundamentals:

After the holiday, downstream producers gradually resumed operations, and demand for liquid aluminium continued to recover. As of Thursday this week, the weekly proportion of liquid aluminium rebounded about 1.2 percentage points W-o-W, end-use demand steadily recovered, and downstream operating rates improved further. Driven by the PV installation rush, operating performance was strong; construction recovered slowly after the holiday, and extrusion operating rates rose m-o-m; boosted by auto and packaging orders,  aluminium plate/sheet, strip and foil operating rates also rebounded this week.

Affected by high aluminium prices and greater futures fluctuations, downstream sentiment toward aluminium ingot procurement remained cautious.  Aluminium ingot accumulated at railway platforms continued to flow into inventory, and China's aluminium social inventory posted an inventory buildup of about 23,000 tonnes m-o-m, with the seasonal inventory buildup pattern continuing.

In summary:

Geopolitical conflicts intensified supply concerns; combined with visible shortage pressure caused by trade restrictions on Russian aluminium imposed by some countries and regions, tightness in LME spot aluminium continued to worsen. LME cancelled warrants kept rising, with the share moving higher, and actually available inventory had fallen to the lowest level since May 2025. Structurally, by the end of February, the share of Russian aluminium in LME available inventory rose from 58 per cent in January to 60 per cent, while the circulation volume of non-Russian aluminium remained scarce. Spot buying from Europe and Asia poured into LME warehouses in a concentrated manner, further accelerating inventory depletion.

Against the backdrop of continued tightening LME liquidity, LME  aluminium still had momentum to strengthen, with strong support from overseas prices, and was expected to maintain a backwardation structure in the short term. China, by contrast, remained in a phase of high inventory plus weak spot fundamentals, with upward momentum clearly weaker than outside China. Amid diverging domestic and overseas drivers, the SHFE/LME price ratio is expected to continue weakening. Aluminium prices are expected to continue to fluctuate at highs next week, with the most-traded SHFE  aluminium contract expected to trade at RMB 24,500-25,800 per tonne and LME  aluminium at USD 3,400-3,600 per tonne.

Note: This article has been issued by SMM and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.