Up more than 4%! Policy Support Stimulated Shanghai Aluminum Prices to Hit a New High in Over 3 Years on the First Trading Day after the Holiday

The current surge in aluminum prices is primarily driven by strong macroeconomic policies, and the current price has deviated from fundamental factors, being more influenced by market sentiment. However, the reality of suppressed consumption and continuously increasing inventories is also a factor that cannot be ignored.

On the first trading day after the New Year holiday, the Shanghai aluminum futures contract continued to open higher with a gap-up after six consecutive days of gains. During intraday trading, it rose by more than 4%, reaching a high of 23,780 RMB/ton, a new high since March 2022. By the end of the day's trading, the Shanghai aluminum futures contract closed at 23,645 yuan/ton, a gain of 3.98%.

LME aluminum also continued to rise during the New Year holiday and successfully broke through the $3000/ton mark. It continued to rise after opening today, reaching a high of $3069/ton during intraday trading, setting a new high since May 2022.   

Regarding spot prices, according to SMM spot price data, on January 5th, the SMM AO0 aluminum spot price increased by 850 RMB/ton in a single day, rising to 23290-23330 RMB/ton, with an average price of 23310 RMB/ton.

According to SMM, the main reasons for today's significant surge in aluminum futures prices are the earlier expectations of a decline in the US dollar, coupled with the anticipated ceiling on domestic production capacity and the boost from short-term domestic consumption policies on the first day after the holiday.

Specifically, the U.S. dollar index fell by 9.42% in 2025, recording its largest annual decline in eight years since 2017, after a year of interest rate cuts, fiscal concerns, and uncertain trade policies under President Trump. The market expects these factors to persist in 2026, suggesting the possibility of continued dollar weakness. A large amount of data will be released this week, including the non-farm payrolls report on Friday, which is expected to provide clues as to whether the Federal Reserve will further cut interest rates. Currently, the market expects the Fed to cut interest rates twice this year, while previously there was significant disagreement within the Fed, with some expecting only one rate cut.

From a policy perspective, by the end of 2025, a series of favorable domestic consumption stimulus policies were introduced. The domestic fiscal work conference explicitly stated that in 2026, spending would be expanded to boost consumption, with a focus on areas such as new productive forces.  Furthermore, the national subsidy program for 2026 was implemented and funding was allocated, aiming to stimulate the replacement of old consumer goods with new ones. This is expected to boost downstream aluminum demand in the medium to long term, providing policy support for the market.

Furthermore, on the first day after the New Year's Day holiday, domestic policy stimulus provided further support. Nine government departments, including the Ministry of Commerce, jointly issued the "Notice on Implementing the Green Consumption Promotion Action," which mentions promoting green home appliances and home furnishings, encouraging the purchase of green and smart home appliances and non-CFC air conditioners that have obtained green product certification; promoting green consumption in the automotive sector, and supporting consumers in purchasing new energy vehicles. The notice also emphasizes strengthening the automotive industry chain, exploring the potential of the "aftermarket" including used cars, car leasing, car modification, and car sharing; exploring ways to generate income from idle vehicles; and supporting the development of new consumption models such as RV camping, drive-in theaters, and self-driving tours.

In terms of news developments, the political conflict in Venezuela also sparked market discussions. Public data shows that Venezuela has approximately 3.48 billion tons of bauxite resources, with proven reserves of 1.33 billion tons, ranking third globally. However, it's important to note that the development and exploration of bauxite resources in Venezuela are relatively low, and it is not a major producer or consumer in the global aluminum market. Therefore, the conflict there will not have a direct impact on the overall supply chain. Overall, while this event may have some emotional impact on the market, its actual impact on the supply and demand of the aluminum market is minimal.

Regarding the current aluminum market, according to SMM, aluminum prices have remained high recently. Downstream demand is constrained by both high aluminum prices and environmental production restrictions, leading to a significant decline in the proportion of molten aluminum used. Operating rates in several downstream sectors, such as aluminum profiles, remain weak, and spot market consumption is sluggish.

Furthermore, inventories have recently shown an accumulating trend. According to SMM data, at the end of 2025, as the previously widely discussed issue of shipping backlogs in Xinjiang came to an end, domestic aluminum ingot inventories began to accumulate from mid-December, successively breaking through the 600,000-ton and 650,000-ton marks. By the end of December, the cumulative increase in inventory compared to the inventory on December 18th was nearly 15%. As of January 4, 2026, the social inventory of electrolytic aluminum in different regions had increased to 684,000 tons, and the continuous accumulation of aluminum ingot inventory has exerted some downward pressure on the upward momentum of aluminum prices.

Overall, SMM believes that the current rise in aluminum prices is mainly driven by strong macroeconomic policies, and that current aluminum prices have deviated from fundamentals, being driven more by sentiment. However, the reality of suppressed consumption and continuously increasing inventories is also a factor that cannot be ignored. Going forward, it is necessary to be wary of the risk of aluminum prices falling due to weak demand once the positive sentiment fades. However, the current "booming" policy environment provides some support for aluminum prices, and it is expected that aluminum prices will mainly fluctuate at high levels in the short term. Further monitoring of policy guidance on aluminum prices is necessary.

About Shanghai Nosinda Metal Co., Ltd

Shanghai Nosinda Metal Co., Ltd possesses mature production processes and an excellent R&D team. The company's main business includes metal materials (copper, aluminum, stainless steel, carbon steel), mechanical equipment, containers, and the import and export trade of products from large domestic and international factories. The company's products are used in various fields, including aerospace, rail transit, shipbuilding, electronics, packaging and printing, construction and decoration, and new energy, meeting the needs of customers in the metal processing industry.

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