London aluminium prices slid on Monday, with the market weighed down by a surge in Chinese production and looming challenges tied to Beijing’s economic landscape. The spectre of heightened US trade tariffs under Donald Trump’s second administration further complicated the outlook for global demand.
On the London Metal Exchange (LME), three-month aluminium prices fell by 0.7% to $2,585.50 per tonne by 11:22 GMT. This downturn reflects an increasingly pressured metals market, as China—the world’s largest aluminium producer—reported a 3.6% year-on-year increase in output for November. The broader manufacturing sector saw industrial production expand by 5.4%, surpassing forecasts, as Chinese manufacturers ramped up activity ahead of anticipated US trade restrictions.
Alastair Munro, senior base metals strategist at Marex, characterised the manufacturing momentum as pre-emptive, noting, “Many will argue that the uptick was driven by front-loading efforts, with manufacturers expediting production to outpace potential tariffs.”
Chinese producers also rushed to fulfil shipments before a change in export tax rebate policies, further fuelling output. This adjustment, feared to constrict aluminium supply across Asia, led Japanese buyers to agree to a 30% premium increase, settling at $228 per tonne above the benchmark for January to March shipments.
Despite industrial gains, slower retail sales growth painted a mixed economic picture for China. November retail sales expanded by just 3%, underscoring persistent struggles to stimulate domestic consumption. Analysts say this deceleration, coupled with tariff uncertainty, has intensified the risk-averse behaviour prevalent across global metals markets.
Base metal flows have entered a subdued phase as investors retreat in anticipation of the Christmas and New Year period. Munro remarked that “January volatility is incredibly unloved,” capturing the prevailing caution.
Beyond aluminium, copper—a key indicator of economic health—dipped marginally by 0.1% to $9,040.50 per tonne after earlier hitting $9,022, marking its lowest level since early December. While copper prices found some support from data showing China’s new home prices fell at their slowest pace in 17 months, the broader market sentiment remained lacklustre.
Other metals on the LME exhibited varied performances: zinc shed 0.4% to $3,084 per tonne, lead edged up 0.2% to $2,014, tin gained 0.3% to $29,115, while nickel dropped 0.6% to $15,760.
The interplay of rising Chinese aluminium output, shifting trade dynamics, and fluctuating economic indicators continues to cast a shadow over metals markets, leaving stakeholders to navigate an increasingly unpredictable landscape.
