HSBC-China Aluminium Sector Prices extend gains as tightness materialises-20260106

Aluminium price is at a multi-year high and on track to surpassthe record high this year as supply constraint persists

We believe supply tightness is already visible and set todeepen as capacity is at high utilisation with low inventories

Aluminium is our preferred China material sector; lift TPs forHongqiao to HKD41.00 (from HKD37.40) and Chalco-H/A toHKD15.20/RMB14.90 (from HKD12.30/RMB12.10), all Buy

Tightness is no longer a forecast – it is happening: As expected in our outlook(see 2026 outlook: Tightening supply meets resilient demand, 28 November 2025),the aluminium market has entered 2026 with tighter fundamentals. Demand remainedresilient into year-end amid a later-than-usual Chinese New Year that pulledconsumption forward. At the same time, China’s aluminium output remainsconstrained by the effective 45mt capacity ceiling, while overseas additions remainlimited. This tightening balance has translated into price action. SHFE aluminiumprices have moved >RMB23k/t and LME prices >USD3k/t, marking new multi-yearhighs, but have yet to revisit the historical peaks seen in 2021/22 (>RMB24k/t and>USD3.8k/t), suggesting upside potential if conditions persist or tighten further.