Aluminum, a widely used material found in products such as aluminum alloy doors and windows and high-speed train carriages, has seen its prices climb steadily since November of last year. On January 13 of this year, the price of the primary aluminum futures contract on the Shanghai Futures Exchange broke through 25,000 yuan per ton for the first time, setting a new historical record, and has since continued to fluctuate at elevated levels. What factors are driving the rise in aluminum prices, and how is this affecting the upstream and downstream segments of the industrial chain?

At an aluminum processing plant in Kunming, Yunnan, molten aluminum is precisely fed into specialized casting equipment. After shaping, cooling, and solidification, silver-white standard aluminum ingots are produced in succession. Staff at the facility reported that the company’s current annual production capacity stands at 3.08 million tons, with a daily output of approximately 3,500 tons of aluminum ingots.

Li Yunsheng, a sales representative for casting alloys in the manufacturing department of Yunnan Aluminium Co., Ltd., stated: "We are currently operating at full capacity. Recent orders and shipment volumes have increased noticeably, and there is no inventory of finished products—goods produced each day are shipped out the same day."

It was noted that with spot aluminum prices remaining high, the company is working overtime to fulfill orders and ensure product deliveries around the Spring Festival holiday.

Ning Degang, Vice President of Yunnan Aluminium Co., Ltd., added: "Since the start of the year, prices have risen by more than 2,000 yuan per ton. As aluminum prices increase, we see that 80–90% of our downstream customers are covered by annual long-term contracts. At present, our focus is on maintaining normal production and ensuring timely deliveries before and after the Spring Festival."

Xu Sen, an aluminum trader from Anhui, mentioned that in previous years, aluminum prices typically rose by around 5% annually. However, current prices have reached the highest levels he has seen in his career. As a result, he has become more cautious and is hesitant to purchase large quantities of material impulsively.

Xu noted: "When prices first started rising about 20 days ago, many took a wait-and-see approach, and we also avoided large-scale stockpiling. But downstream demand has remained strong. Now, our warehouse is operating with high turnover, shipping out roughly 100 tons per day."

As of February 5, 2026, the primary aluminum futures contract on the Shanghai Futures Exchange closed at 23,455 yuan per ton, up approximately 7.94% from 21,730 yuan per ton in early December 2025. Meanwhile, London Metal Exchange aluminum prices surged from around $2,800 per ton in early December 2025 to $3,059 per ton by early February 2026, an increase of about 9.25%, firmly holding above the $3,000 mark.

Mi Yanbin, an analyst at SCI, commented: "Looking at the domestic electrolytic aluminum price trend in 2025, the overall movement was volatile but upward, with a notable acceleration toward year-end. Since the beginning of 2026, aluminum prices have maintained their strength, breaking through historical highs early in the year. Although there has been some short-term pullback, the supply-demand balance remains tight, and prices continue to trade at elevated levels."

**Supply Constraints and Rising Demand: Multiple Factors Drive Aluminum Prices Higher**

China is the world’s largest producer and consumer of aluminum. As downstream applications continue to expand, the growth in aluminum production capacity has struggled to keep pace with rising demand, becoming a major factor behind the price increase.

Industry insiders pointed out that the rapid growth of emerging sectors such as new energy vehicles and photovoltaic energy storage has directly driven the expansion of aluminum consumption. The range of applications for aluminum continues to widen.

At the same time, aluminum-for-copper substitution in industries such as home appliances, AI computing, and new energy vehicles is entering a phase of large-scale application, further boosting aluminum demand.

Data show that aluminum consumption in China’s automotive sector reached 5.3778 million tons in 2025, an increase of 1.1017 million tons from 2024, representing a growth of 25.76%.

However, domestic electrolytic aluminum production capacity is constrained by policy. Electrolytic aluminum production is highly energy-intensive, with estimates indicating that producing one ton requires approximately 13,000 to 15,000 kWh of electricity. Since 2017, the central government has imposed an annual production cap of around 45 million tons for the electrolytic aluminum sector, pushing the industry to optimize its structure. In 2025, domestic electrolytic aluminum output reached 43.9233 million tons, indicating that the cap is now binding. In addition, global economic and geopolitical uncertainties have introduced external volatility into aluminum prices.

Lin Ruhai, Deputy Secretary-General of the China Nonferrous Metals Industry Association, noted: "The rise in electrolytic aluminum prices is supported by fundamental factors, but non-industry influences are even more pronounced. If the international environment and consumption expectations do not change, the dual support of supply constraints and strategic value reassessment will likely lead to long-term adjustments in the industrial structure."