LME aluminium prices edge up marginally amid falling inventories and supply uncertainty

• Stronger US dollar weighs on aluminium market sentiment
• Chinese inventories decline on improved downstream demand

LME three-month aluminium prices increased by $6/t, or 0.2% w-o-w, to $3,018/t on 23 October from $3,012/t on 16 October, indicating a marginal recovery in global aluminium prices.

Meanwhile, LME aluminium inventories declined by 2,075 t, or 0.9% w-o-w, to 235,800 t from 237,875 t over the same period. The modest price increase alongside falling warehouse stocks suggests some improvement in market sentiment, although the overall price movement remained limited.

Factors weighing on LME aluminium prices

Aluminium market sentiment remained supported by declining inventories and resilient consumption in China. Chinese aluminium ingot inventories fell by 53,000 t w-o-w to 583,000 t as of 22 October, reaching their lowest level for the period in nearly four years. The decline reflected improved downstream demand following the recent market correction, which encouraged warehouse withdrawals, alongside logistical constraints affecting metal shipments and a shift towards aluminium billet production. However, expectations of recovering overseas supply, supported by production resumptions and new capacity additions in Indonesia and the Middle East, limited further gains.

Meanwhile, broader macroeconomic and geopolitical uncertainties continued to weigh on market sentiment. Expectations of tighter US monetary policy, a stronger US dollar and elevated Treasury yields pressured non-ferrous metals, while tensions in the Middle East raised concerns over energy costs and inflation. Although global aluminium supply remained relatively tight following earlier disruptions to Middle Eastern smelting capacity, expectations of additional supply from Indonesia, China and recovering Gulf producers eased concerns over prolonged shortages. LME aluminium inventories also declined by 2,075 t to 235,800 t, reinforcing underlying supply tightness. Nevertheless, cautious downstream purchasing and uncertainty over future supply growth limited the extent of the market recovery.

Outlook

LME aluminium prices are expected to remain range-bound in the near term, with declining inventories and resilient Chinese demand providing support. However, expectations of recovering global supply, a stronger US dollar and macroeconomic uncertainties may limit upward momentum. Market direction will largely depend on Chinese consumption trends, overseas smelter output and changes in global inventory levels.