At the end of October 2025, a "butterfly effect" in Iceland quietly triggered a global shock in the aluminum market - Century Aluminum's Iceland smelter suddenly reduced production by two-thirds due to equipment failures, directly causing a reduction of approximately 200,000 tons in global electrolytic aluminum supply. At that time, most market participants remained on the sidelines until copper prices hit a record high, pushing the copper-aluminum ratio to 4.21 times. Compared with around 1.7 times in 2005, this ratio has been in the high range of nearly 20 years. The narrative of "aluminum replacing copper" heated up across the board, with huge amounts of capital pouring in frantically. Aluminum prices broke through a three-year high in just a few weeks, staging a surge driven by the shift in market consensus.

This surge seems to lack complex logical reasoning; the core lies in the sudden shift of massive funds between 'belief' and 'disbelief'. However, at the moment when market consensus is formed, the rigid constraints of fundamentals and the speculative enthusiasm of funds resonate strongly, directly pushing aluminum prices out of the short-term fluctuation range and into an upward channel," a commodity investor who has long tracked the aluminum industry said in an interview with China Business News. The core of this consensus is that the key driver behind the current rise in aluminum futures prices is not the demand from physical production and operation, but the speculative power of capital.

The futures market is hot, while the industrial market is cold

As the "Capital of Aluminum Materials in China", Foshan is the most direct perceiver of this aluminum price storm. During interviews, reporters found that not only are industry-leading enterprises such as Xingfa Aluminum, Fenglu Aluminum, and Jianmei Aluminum gathered here, but also thousands of small and medium-sized processing enterprises and traders, forming a large-scale industrial cluster. Data shows that Foshan's annual output of aluminum profiles accounts for more than 40% of the national total output, with an annual production capacity of 4 million to 5 million tons and an annual output value of over 100 billion yuan, accounting for about 5% to 8% of the city's above-scale industrial output value, thus becoming an important pillar of the regional economy.

The weight of the aluminum industry in Foshan's economy is evident from corporate rankings: in the 2025 Foshan Top 100 Enterprises and Top 100 Private Enterprises lists, there are nearly 10 enterprises with the word "aluminum" directly in their names; if extended to the entire aluminum industry chain, the number of related enterprises is even larger. These enterprises do not exist in isolation. Instead, they have built a complete "aluminum ecosystem" in regions such as Nanhai and Sanshui, covering everything from aluminum ingot processing and profile production to trade and circulation, forming an industrial pattern of coordinated development.

A reduction in production at Century Aluminum's smelter only affects 0.3% of global supply, which is essentially a local incident, but it just happened to be an excellent trigger to dispel the market's hesitation to be bullish," a senior investor in Foshan said when reviewing the market situation. Capital has the sharpest sense of changes in the supply and demand pattern, and its large-scale entry directly broke the original balance of the market, ultimately triggering a global surge in aluminum prices.

The explosive rise in aluminum prices is not driven by independent factors in the industry, but an inevitable result of the rotation of bulk commodities," analyzed a practitioner engaged in bulk commodity trading in Foshan for many years. He pointed out that the transmission chain of this price increase is clearly traceable: it started with the rise of precious metals such as gold and silver, and then extended to industrial metals such as copper, aluminum and nickel. "The global economic downturn has led to a lack of high-quality investment channels for hot money, so bulk commodities have naturally become the target of speculation. Combined with factors such as exchange rate fluctuations and geopolitical turmoil, the price increase wave has logically spread to the field of industrial metals.

This market shift between "belief and disbelief" has transformed into a survival choice and industrial transformation practice for Foshan's aluminum enterprises. The person in charge of a Foshan aluminum trading company revealed to reporters: "The hidden worries under the rapidly rising market are particularly prominent in the Foshan market, and the core contradiction is the divergence between 'emotional buying due to rising prices' and 'entity buying due to falling prices'." It is reported that Foshan's aluminum enterprises generally adopt the business model of "aluminum ingot price + processing fee", which is similar to the accounting method of "land price + construction cost" in the real estate industry, making the direct impact of aluminum price fluctuations on corporate profits relatively limited. However, inventory data reflects the cautious sentiment in the market - currently, aluminum inventories in Foshan continue to increase, the core reason being that purchasers have a strong wait-and-see attitude. Most enterprises adhere to the principle of "producing according to orders" and no longer blindly expand production and hoard goods when there are no orders, ultimately forming a sharp contrast between "a hot futures market and a cold industrial market".

From the perspective of the relationship between futures and spot markets, the phenomenon of divergence between futures and spot prices of aluminum is far less than that of stainless steel, but the current rise in aluminum prices has overdrawn some future expectations." A manager who has been deeply engaged in aluminum trading for many years admitted that the tight balance pattern of global electrolytic aluminum supply and demand is not stable. Once external factors change, such as capital withdrawal or demand falling short of expectations, market sentiment is likely to shift, and the industry needs to be alert to the risk of subsequent fluctuations.

China's pricing power in the aluminum market

Previously, industrial investors and speculative funds that were skeptical about the 'rigidity of supply' and 'upgrading of demand' have followed the trend to chase the price increases. The leverage effect in the futures market has further amplified this trend, forming a spiral of 'buying up - price increasing - buying up again', which is difficult to contain in the short term." The above-mentioned operator further analyzed the underlying logic behind the price increases: the global economic downturn has led to a lack of high-quality investment channels for hot money, and a large amount of capital has poured into the capital market to speculate on bulk commodities in turn, becoming an important driver of price increases; at the same time, the turbulent global political situation coupled with the market's challenge to the US dollar hegemony has made precious metals take the lead as safe-haven assets to rise in price, with the heat gradually spreading to the industrial metals sector; in addition, upstream leading enterprises hold the right to speak on resources, and their reluctance to sell at low prices has led to tight spot inventories, indirectly boosting price increases, and ultimately forming a market pattern where "the upstream is happy to see it happen, the midstream passively follows, and the downstream takes orders under pressure". It is worth noting that during this round of price increases, the copper-aluminum price ratio has shown a significant divergence. Since 2025, the price of LME (London Metal Exchange) copper futures has risen by 45% cumulatively, while the price of LME aluminum futures has only risen by 22% in the same period. The market generally believes that there is a certain room for ratio repair.

In the global commodity pricing system, precious metals such as gold and silver have long been firmly controlled by the European and American financial and mineral systems. However, as a key industrial metal, China has a significant advantage in pricing power over aluminum. This difference is not accidental; it is a concentrated manifestation of China's full-chain strategic layout and core competitiveness in the aluminum industry.

The absolute dominant position on the supply side is the core cornerstone for China to control the pricing power of aluminum," a chief analyst from a bulk commodity research institute said in an exclusive interview with reporters. The high energy-consuming nature of the electrolytic aluminum industry and the demand for a complete industrial system have built extremely high industry barriers, and China has precisely formed a global-scale advantage that is difficult to shake in this field. Data provided by the analyst shows that by the end of 2025, China's installed capacity of electrolytic aluminum reached 44.83 million tons per year, basically hitting the industry's "ceiling" regulatory target, accounting for more than 57% of the global capacity; the annual output was 44.23 million tons, and the total output of the top 7 Chinese aluminum enterprises accounted for 37% of the global total, far exceeding the sum of other countries. "This centralized capacity layout has endued China with extremely strong supply regulation capabilities.

The dual-wheel drive of the market and financial sectors has further enhanced China's pricing power in aluminum," a relevant person in charge of a futures exchange said. As the world's largest consumer of aluminum, China's demand scale directly determines the core anchor of aluminum prices. With the rapid development of emerging fields such as new energy vehicles, photovoltaics, and UHV, the industrial demand for aluminum continues to grow significantly. This rigid demand makes the Chinese market an important indicator of global aluminum prices.

What is more noteworthy is the continuous enhancement of the influence of China's financial market. "Aluminum futures on the Shanghai Futures Exchange have become an important reference for global aluminum prices and are widely used by industry leaders in spot trade pricing, with the international recognition of 'Shanghai prices' rising steadily," the person in charge revealed. The cast aluminum alloy futures to be launched by the Shanghai Futures Exchange are expected to further improve the delivery system and effectively weaken the pricing dominance of the LME.

At the same time, China's macro-control policies can precisely regulate aluminum supply, thereby affecting global prices. The analyst gave an example: "In 2021, China's dual-control policy on energy consumption promoted a reduction of approximately 3 million tons in annual electrolytic aluminum production capacity, directly breaking the global supply-demand balance, causing a supply shortage of 1.1 million tons in the global aluminum market, and driving up LME aluminum prices significantly. International giants such as Rusal also saw a decline in sales due to China's production reduction, which fully confirms the strong transmission effect of China's policies on global aluminum prices.

The advantage of China's discourse power in aluminum pricing is essentially a manifestation of the comprehensive strength of its industrial system," the analyst concluded. From the supply side, which features dominant production capacity and a closed industrial chain, to the cost side, which boasts advantages in electricity and full-process control, and then to the market side, which has demand support and financial influence, China has built a complete leading system for aluminum price setting.

The way for industries to survive under the dual waves

Facing the complex and ever-changing market environment and policy orientation, enterprises in the aluminum industry are accelerating their strategic adjustments, with overseas layout and domestic transformation advancing in parallel. "Affected by pressures such as the tightening of domestic environmental protection policies and restricted production capacity, we have turned our attention to Southeast Asian regions such as Thailand," said a person in charge of overseas business at an aluminum enterprise. The tariff exemption benefits of local free trade policies can reduce production costs and effectively avoid domestic production capacity constraints. At present, the company's business has focused on green and environmental protection fields such as waste aluminum reprocessing.

The industry is changing so fast now, and operational challenges are increasing." A practitioner who has been engaged in aluminum trading in Foshan for many years said that nowadays, doing aluminum trading not only has to deal with traditional risks such as order pledge, but also needs to keep an eye on dynamics like policy changes and adjustments to overseas rules. "In the past, doing trade only required finding good buyers and sellers, but now one must become an 'all-rounder', and the requirements for the comprehensive operational capabilities of enterprises are getting higher and higher.

At the industrial chain structure level, an industry analyst believes: "In the future, the aluminum industry will still maintain clear hierarchical distribution and profit differentiation characteristics." Bauxite in the upstream remains the core resource of the industry. About 60% to 70% of domestic bauxite depends on imports, among which Guinea's supply accounts for a persistently high proportion. Enterprises with a full-chain layout will continue to occupy profit advantages; the electrolytic aluminum segment, relying on the scarcity brought by the production capacity ceiling, will still account for the main profits of the industrial chain, and the industry discourse power of leading enterprises will continue to be consolidated; the mid-stream alumina segment, affected by both overcapacity and pressure from upstream and downstream, will find it difficult to reverse its predicament in the short term; in the downstream aluminum profile processing field, the transformation towards high-end and refinement is an inevitable trend.

Reporters clearly saw during the interview that the development of the aluminum industry is no longer a one-dimensional expansion of production capacity or price games, but a complex systematic project involving capital flows, policy guidance, technological iteration, and green transformation. Under the dual waves of commodity rotation and industrial structure upgrading, China's aluminum industry is undergoing profound structural changes.

When will the surge in aluminum prices end? It still depends on the ongoing interplay between the fundamentals of supply and demand and market sentiment. For all market participants, this surge is more like a practical lesson on "judging critical points." "To identify the market shift between 'belief and disbelief,' one cannot rely on subjective feelings but must closely monitor core data indicators," the aforementioned senior market insider advised. In terms of investment logic, a clear distinction should be made between short-term sentiment-driven factors and long-term value support: electrolytic aluminum enterprises with low-cost electricity advantages have stronger risk resistance capabilities, while processing enterprises with technological layouts in the "aluminum replacing copper" field will continue to benefit from the upgrading of demand structure; the industrial sector needs to remain rational, arrange production and operation steadily, and proactively adapt to industry changes.

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