Macro and geopolitical factors resonated during Labour Day holiday, LME outperforms SHFE for aluminium

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During China's Labour Day holiday (May 1–5), SHFE aluminium was closed. LME aluminium fluctuated upward. As of 16:00 on May 5, LME aluminium opened at USD 3,508.5 per tonne, reaching a high of USD 3,535 per tonne, a low of USD 3,492 per tonne, and closing at USD 3,528.5 per tonne, up 0.87 per cent from the previous trading day and approximately 1.38 per cent higher than the pre-holiday close (April 30).

During the holiday, the global macro environment, geopolitical landscape, energy dynamics, ex-China monetary policy, and international trade policy all underwent multiple key shifts simultaneously. These intertwined factors fundamentally reshaped the overall trading atmosphere for ex-China commodities, providing solid external support for international aluminium prices. The aluminium market overall exhibited a pattern of concentrated bullish factors fermenting internationally with ex-China fundamentals holding up well, forming a stark contrast with weak demand and inventory accumulation in China's aluminium market, extending the core pattern where LME outperforms SHFE.

During the holiday, global geopolitical tensions flared again. Confrontations and conflicts in the Middle East continued to escalate, with key shipping lanes through the Strait of Hormuz obstructed. Regional geopolitical uncertainty surged significantly, directly disrupting global energy supply chain stability, driving international oil prices to rise rapidly in the short term, and reigniting global energy inflation expectations.

Monetary policy pace among major global central banks continued to diverge, with a notable reshaping of the liquidity landscape. The US Fed maintained interest rates unchanged at its April meeting. New York Fed President Williams publicly stated that if inflation data continued to pull back steadily toward the 2 per cent policy target, the US Fed would cut interest rates at an appropriate time. Meanwhile, the Reserve Bank of Australia bucked the trend by tightening monetary policy, announcing a third consecutive rate hike, raising the cash rate to 4.35 per cent, completely reversing the previous easing cycle. The divergent pattern of "US and Europe on hold, Australia tightening, China maintaining prudent easing" among global central banks solidified.

Protectionist sentiment continued to intensify in international trade, with US-EU trade friction officially escalating. On May 1 local time, US President Trump, citing the EU's failure to fulfil a previously agreed trade deal, announced that additional tariffs would be imposed on EU-imported cars and trucks next week, with rates sharply raised to 25 per cent. Escalating friction between the US and EU as core trading economies not only pushed up overall global manufacturing trade costs and suppressed global end-user manufacturing recovery demand, but would also accelerate the restructuring of global automotive and related industry chain supply chains. As the automotive industry is a core downstream end-use consumption sector for aluminium semis, rising trade barriers would indirectly affect the pace of global aluminium semis end-use consumption. Meanwhile, rising global trade uncertainty further reinforced safe-haven trading sentiment in commodities.

Inventory side, as of May 1, 2026, LME aluminium inventory stood at approximately 364,700 tonnes, continuing destocking to hit a nearly 20-year low. China inventory side, pre-holiday (April 30) aluminium ingot inventory in major consumption areas was 1.432 million tonnes. A trend reversal in social inventory remains difficult to form, and China aluminium ingot inventory will stay in the high range of 1.45–1.5 million tonnes after the Labour Day holiday.

Overall, multiple positive factors converged on the international front during the Labour Day holiday, with geopolitical conflicts, low overseas inventory, a weaker US dollar, and elevated energy costs resonating together to strongly support LME aluminium prices to hold up well. The ex-China aluminium market features tight supply, high costs, and a warm sentiment. In contrast, China's aluminium market was dragged down by social inventory accumulation and sluggish off-season downstream demand recovery, limiting upward momentum. In the short term, the core pattern of LME outperforms SHFE is unlikely to reverse. Strength in the overseas market will support SHFE aluminium's post-holiday catch-up potential, but high domestic inventory and weak demand will cap overall gains. Going forward, key focus will be on the pace of China aluminium ingot destocking and the strength of rigid demand release from downstream production resumptions.

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.