Aluminium prices have continued to rise on the LME, surpassing $2,900 per tonne. This year, Aluminium has seen an increase of over 13%, positioning it as the third-best performer after Copper and Tin on the LME.
This price surge is supported by anticipated supply reductions in China and a positive market sentiment due to easing US-China tensions. A trade truce between the US and China has mitigated a major risk for industrial metals outlooks.
China’s Aluminium production is nearing its 45 million tonne capacity limit, introduced in 2017 to manage oversupply and emissions. The global Aluminium market is expected to remain balanced in the coming year if this cap is maintained, affecting exports and keeping non-China markets tight.
Europe and the US have not seen many restarts due to challenges in securing long-term energy contracts at affordable prices. Conversely, Indonesian Aluminium exports are increasing rapidly, potentially impacting prices next year. The broader Copper rally has also bolstered Aluminium prices, with the Copper-Aluminium price ratio reaching near-record levels, suggesting more potential for substitution from Copper to Aluminium.
Aluminium prices are strong, trading above $2,900 per tonne, which is a gain of more than 13% since the start of 2025. We’ve seen prices recently test the $2,950 level, supported by heavy trading volume on the LME. Open interest in aluminium futures has also increased by 8% in the last month, suggesting traders are confident in the current upward trend.
The main driver for this price strength is the supply situation in China, which is hitting its production ceiling of 45 million tonnes. Recent data for October 2025 showed annualized production running at 44.8 million tonnes, leaving very little room for more output. This tightens the global market because it limits China’s ability to export surplus metal, a significant change from what we saw in previous years.
We also need to watch the copper market, which has been a major tailwind for aluminium prices. With copper having hit a record high above $12,000 per tonne earlier in 2025, the price ratio between the two metals is now near 4.1, far above its historical average. This is making aluminium a much cheaper alternative, and we expect industrial users to increasingly substitute copper with aluminium in applications like electrical cabling.
Given this bullish backdrop, we see opportunities in the options market for the coming weeks. Traders could look at buying call options with strike prices around $3,000 to $3,100 for January and February 2026 expirations. This approach allows for participation in further upside while limiting the risk of a sharp pullback from these elevated levels.
However, we must remain watchful for any signs of a market shift. The rising exports from Indonesia are a key factor for 2026, so any acceleration there could create headwinds for the price next year. For now, traders should monitor LME warehouse inventory levels, which are currently near historic lows of under 300,000 tonnes, for any indication of changing supply dynamics.
