Aluminum Piles Up in China as Metal Prices Soar

Aluminum, one of the metals most directly affected by the war in Iran, is struggling to attract buyers in China after prices surged to a four-year high.

The lackluster performance of a widely used industrial material could signal broader weakness in China’s economy

Demand is disappointing, and inventories are piling up, even as factories enter the busy period following the Lunar New Year, Bloomberg News reported.

Stockpiles of primary aluminum have climbed above 1.3 million tons, the highest level since 2020. More exports are expected to help clear the glut.

“Chinese fabricators have slowed purchases to just meet hand-to-mouth demand,” said Huang Yuyao, an analyst with research firm Mysteel Global. Their appetite worsened after prices spiked, she added.

The lackluster performance of a widely used industrial material could signal broader weakness in China’s economy, which rebounded in the first two months of the year but now faces the fallout from higher energy costs and other disruptions due to the conflict in the Middle East.

Although operating rates at fabricators that shape aluminum have risen since the lunar holiday, overall demand still lags behind the previous year due to elevated prices, Howard Lau, China materials analyst at HSBC Holdings Plc, said in a note.

The slowdown in demand for primary aluminum is rippling through the domestic supply chain. Inventories of semi-finished products are around 600,000 tons, about 75% of last year’s level, according to Mysteel.