Middle East conflict pushes China's aluminum demand to a record high

Middle East conflict drives aluminum demand in China to a record high. The gap between international aluminum prices and the Chinese market is at its widest since 2022, creating a large opportunity for Chinese smelters amid severe supply disruptions. Aluminum is produced at a plant in Wuhan, Hubei Province, China. (Photo: AFP/TTXVN) China's aluminum exports are forecast to surge in the coming months as buyers seek substitute supplies to make up for disruptions in the Persian Gulf region. The conflict in Iran, now in its seventh week, is choking supply from a region that accounts for about 9% of global output. China, as the world's largest producer, becomes the natural substitute. Currently, the gap between international aluminum prices and the Chinese market is at its widest since 2022. This creates a large opportunity for Chinese smelters as domestic aluminum inventories have just reached their highest level in six years. Beijing Aladdiny Zhongying's analyst Zhu Liangmin said foreign orders for aluminum products used in car manufacturing and packaging are expected to rise significantly in April. Aladdiny also forecasts annual export sales could equal or surpass the record 6.7 million tonnes achieved in 2024 thanks to demand arising from the war. Data show that China's aluminum exports in March reached 485,000 tonnes, up 13% from February. While this figure remains below the year-ago period, the month-on-month growth suggests the conflict may already be affecting the market. In the first quarter, aluminum exports reached 1.46 million tonnes, up 6.5% from the pace of last year. Zhang Meng, CEO of Shandong Aize Business Information Consulting, says global customers are increasing purchases of semi-finished products from China, which could lead to a surge in exports in May and June. According to this consultancy, international traders are also seeking new ways to procure metals from China, such as buying aluminum billets to remelt into versatile ingots. However, high shipping costs due to the war could constrain this trade. In the context of China’s domestic economy slowing, exports are becoming an important channel to absorb record-high production. Bloomberg Intelligence forecasts that profits from the smelting industry will stay at record highs. Nevertheless, this provider notes that rising inventories could blunt price gains in the domestic market. Another domestic headwind is that the automobile industry is gradually shifting to magnesium alloy—a lighter substitute to aluminum for manufacturing vehicle parts.