Aluminum prices rose by 7.97% in January
| Gamma-PGA (gamma polyglutamic acid) |
Aluminum prices remained strong in January and have recently experienced a slight decline. As of January 28, 2026, the average price of domestic aluminum ingots in the East China market was 24265 yuan/ton, an increase of 7.97% from the market average price of 22473.33 yuan/ton on January 1; Compared to the high point of the month (1.14), the market average price is 24673.33 yuan/ton, a decrease of 1.65%
In January 2026, aluminum prices continued the strong momentum of 2025, with a strong upward trend in early January, repeatedly reaching new highs. The core of this trend is due to three main factors: rigid supply constraints, structural growth in demand, and resonance between macro and financial factors, coupled with low inventory and rising costs, forming a pattern of “easy rise but difficult fall”. However, when aluminum prices reach a new high, it is not advisable to blindly chase after them. The core lies in the accumulation of inventory during the off-season, downstream negative feedback, macroeconomic policy variables, supply elasticity, and capital profit taking, which add multiple pressures. The vulnerability of high prices increases, and the risk of a pullback is significantly greater than chasing high returns. The specific reasons are as follows:
1. Fundamentals: Accumulated inventory during the off-season+weak downstream delivery, exacerbating negative feedback
Before the Spring Festival, downstream processing enterprises gradually took a break, and the traditional off-season of consumption combined with high prices suppressed purchasing intentions. Aluminum ingot warehouses continued to accumulate, with domestic warehouses of about 796000 tons as of January 28, nearly 800000 tons compared to last week’s cumulative warehouses of 28000 tons, higher than the same period last year. Spot futures contracts were discounted and widened, highlighting downstream wait-and-see sentiment.
Aluminum rod processing fees have turned negative, small and medium-sized processing plants have reduced production/stopped production, terminal demand transmission is not smooth, real estate is weak, automobile orders are overdrawn, traditional demand is difficult to sustain high prices, and only emerging demand such as new energy is difficult to support alone.
2. Supply side: Potential increase and expected resumption of production, gap or narrowing
The domestic electrolytic aluminum production capacity is approaching the policy ceiling of 45 million tons, but if Indonesia’s new production capacity lands faster than expected and European electricity prices fall, it will drive some aluminum plants to resume production, increase global supply, and narrow the supply-demand gap.
The marginal adjustment of environmental policies and the easing of overseas geopolitical tensions may release idle production capacity. The tight supply is not absolutely rigid, and high prices may stimulate companies to accelerate their resumption/expansion plans.
3. Macro: Policy shift and economic recovery uncertainty, suppressing metal prices
If the expectation of the Federal Reserve’s interest rate cut is delayed or not as strong as expected, the strengthening of the US dollar will directly suppress industrial metal prices, and the slowing pace of global economic recovery will drag down aluminum demand in the manufacturing industry.
The weak recovery of the domestic economy and the slower than expected stabilization of the real estate market make it difficult to implement incremental policies to support the sustained rise in aluminum prices. If macroeconomic sentiment cools down, capital outflows will trigger a temporary decline in spot prices.
4. Funds and Emotions: High level profit taking and increased volatility risk
After the aluminum price hit a new high, the willingness of speculative funds to profit and leave the market has increased, and market sentiment is easily affected by the linkage of sector trends.
5. Cost and Valuation: Price deviates from fundamentals, with a pullback resulting in higher cost-effectiveness
The cost of electrolytic aluminum, including taxes, is about 16200 yuan/ton. Although there is cost support, the current price has deviated significantly from the cost, and there is more room for high-level adjustment than upward adjustment. The demand for hedging by aluminum ingot manufacturers has increased.
Although global explicit inventory is low, structural shortages are difficult to support unlimited price increases. If inventory accumulates beyond expectations, it will break the pattern of “easy to rise but difficult to fall”.
In summary, behind the high aluminum prices is a game of “strong supply expectations” and “weak demand reality”. Short term accumulation, downstream negative feedback, macroeconomic variables and other factors all point to the risk of a pullback, and the cost-effectiveness of chasing high and hoarding is extremely low.
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