Aluminum Tops $3,050/ton and Nickel Near $16,900 Highlight Supply-Side Pressures in Metals Markets

London | EcoPulse24

Aluminum futures traded in the UK continued their rally, exceeding $3,050 per ton - the highest level in over three years - amid growing signs of supply tightening for manufacturers. China, the world’s largest aluminum producer, reaffirmed its priority to rein in excess production capacity to mitigate deflationary pressures as output nears the 45 million ton ceiling this year. This has prompted smelters to curb expansion through 2026, redirecting supplies to domestic markets at the expense of exports, which fell 9.2% year-on-year in November. Simultaneously, plans for new smelters in Indonesia have stalled due to high energy costs and regulatory risks. In other regions, elevated energy costs, equipment failures, bauxite supply challenges, and geopolitical risks have disrupted key smelters in Iceland, Mozambique, and Australia.

Similarly, nickel futures in the UK jumped to around $16,900 per ton in January, gaining nearly 20% over the past three weeks, marking a one-year high. This followed Indonesia's proposal to reduce nickel output by 34% for the 2026 budget to address oversupply concerns and deteriorating ore grades. Despite these measures, previous surpluses still weigh on the market; Russian firm Nornickel raised its surplus forecast for next year to 275,000 tons, while London Metal Exchange stocks increased by over 93,000 tons to 255,000 tons last year. On the demand side, sluggish stainless steel purchases have limited momentum, though electric vehicle-related uses provided some support.

Analysis
The simultaneous rise in aluminum and nickel prices reflects a gradual shift toward structural supply tightness, driven by restrictive production policies and global operational challenges. With industrial demand remaining uneven, prices appear increasingly driven by short- to medium-term supply factors, heightening market sensitivity to regulatory signals or further production disruptions.