Aluminium Prices in China Expected to Rise in September Amid Lower Production and Strong Demand

Aluminium prices in China are projected to trend higher in September, supported by favorable macroeconomic conditions and a decline in production, particularly in Yunnan province, according to analysts from the Shanghai Metals Market. Production growth is anticipated to slow, with an estimated year-on-year increase of just 1.4% to about 3.6 million metric tons for the month. Analysts expect the most-traded Shanghai Futures Exchange aluminium contract to fluctuate between 18,750 and 20,100 yuan/mt ($2,570-$2,755/mt).

After a seasonal dip in demand during August, orders from the photovoltaic and automotive sectors have picked up, contributing to a slight recovery in operations for some manufacturers. These sectors are expected to drive further demand in the coming months, supporting the upward trend in aluminium prices.

In a related development, China’s plan to increase steel production using the low-carbon direct reduced iron (DRI) process over the next decade is set to reduce its reliance on Australian iron ore. The DRI technique favors magnetite ores, which are more common in regions like Guinea and South America, potentially decreasing China’s demand for Australian iron ore by tens of millions of tonnes annually.