Aluminum prices witnessed marginal decline in recent trade and settled 0.26% lower at Rs. 329.45. The rise in the US dollar has clearly put pressure on base metals, but the bigger issue quietly weighing on trader confidence is the threat of a massive global surplus by 2027. Additionally, everyone is keeping a close eye on Middle East tensions, with new jitters rising especially with potential political changes around the US midterm elections.
Supply is increasing at major smelters
The supply side is getting crowded again. Emirates Global Aluminum has restarted 631 of its 1,262 reduction cells at the Al Taweelah smelter. This brings half of its total capacity back online, with the plant on track to run at 100% by the first quarter of 2027.
At the same time, Chinese smelters are working on top gear. China produced 3.91 million tonnes of primary aluminum in September alone, up 3.1% from a year earlier. Their production rose 2.2% to 11.84 million tonnes in the third quarter. In the first nine months, China produced 35.03 million tonnes – a solid increase of 3.8% year-on-year. Solid operating profits and improved plant efficiency are keeping sugar production near record highs.
Mixed global production and looming 2027 surplus
Despite pressure from China, worldwide primary aluminum production actually declined 1.4% year-on-year in September to 6.014 million tonnes, mainly due to the slowdown experienced at plants across the Gulf. However, supply bottlenecks there are already being overcome. Shipping traffic through the Strait of Hormuz is now improving significantly, helping Gulf smelters to get their metal to buyers again.
Indonesia is also showing up in a big way, exporting more than 150,000 tonnes of aluminum in August. When you combine incoming Indonesian metals and the improvement in Gulf production, market watchers are nervous. Many fear that these expansions could add more than 1 million tonnes of oversupply to the global market by 2027.
The current list remains surprisingly tight
Although the long-term supply story looks loose, the physical metal is really hard to find in some places right now. Stocks in warehouses on the Shanghai Futures Exchange (SHFE) fell more than 10% to 212,858 tonnes. London Metal Exchange (LME) reserves stand at around 234,100 tonnes.
In Japan, port inventories fell 9.5% month-on-month to 223,200 tonnes at the end of September, proving tight spot metals. Interestingly, Japanese buyers still managed to negotiate a lower premium and settled for October to December shipment at $255 a tonne. This is a huge discount of 35% compared to the previous quarter.
Technical Outlook for Aluminum Traders
Looking at the market data, traders are closing long bets. Open interest fell 1.15% to 4,471 contracts as the rupee declined in prices. 0.85 per kilogram. This indicates clear long unwinding rather than heavy fresh short selling.
To keep an eye on key levels, Aluminum has immediate support around Rs. 327.50. If it breaks, prices may test Rs. 325.50. On the other hand, sellers are defending Rs. 331.50. If buyers can overcome that resistance with good volumes, the metal may move sharply towards Rs. 333.00.
Key Points for Aluminum Traders and Buyers
- Short-term tight, long-term loose:Spot warehouses in Asia are low, but the threat of a 2027 surplus keeps major rallies in check.
- Monitor the US Dollar:Any sustained strength in the greenback will keep making industrial metals expensive to hold.
- Major price areas:Rupee. 327.50 remains an important level to defend, while Rs. 331.50 stands as a hurdle for any recovery.