China’s Aluminium Output Cap to Offset Trade War Weakness, But Prices Face Recession Risks

Despite slumping demand from U.S.-China trade tensions, aluminium prices may find a floor thanks to China’s strict 45 million-ton annual production cap, analysts say. However, recession fears and tariff uncertainties could push prices to 2021 lows if global growth falters.

Key Drivers:

• China’s Output Cap: Enforced since 2017, the 45M-ton limit keeps global supply tight, with no major expansions expected.
• Trade War Impact: LME aluminium fell 2% this year after Trump’s tariffs, but China’s production discipline limits downside.
• Supply-Demand Balance:
  • 2024 surplus forecast at 280K tons (negligible vs. 76M-ton global supply).
  • Yunnan hydropower shortages could flip the market into deficit.

Price Outlook:

• Base Case: ~$2,600/ton (near current levels) on constrained supply.
• Recession Risk: Could plunge below $2,000 if demand craters.
• Aluminium vs. Copper: Likely to outperform copper due to tighter long-term supply.