The Aluminum Monthly Metals Index (MMI) trended up, rising 4.12% from December to January.
The aluminum market bias remains decidedly bullish. Although prices showed a modest pullback during the third week of January, they are still holding above their expected range and at their highest level since 2022. This indicates that the long-term uptrend remains firmly intact. Meanwhile, the Midwest Premium is currently sitting at a new record high of $0.9761/lb, inching ever-closer to the $1.00/lb market.
Both trends appear largely underpinned by supply concerns. Conditions suggest an overall tightening within the domestic market, and mill lead times across most categories lengthened significantly month over month. Most U.S. mills are fully allocated, a situation that has been worsened by the ongoing outage at Novelis’ Oswego facility. One source also noted delays coming from Texarkana.
These domestic constraints have appeared to boost interest in offshore supply among buyers. Import data from the Department of Commerce shows there was a gradual uptrend in volumes toward the end of 2025. Brokers of offshore material echoed this trend, noting increased buying activity for spot supply alongside elevated interest in futures contracts with foreign mills.
During the second half of last year, sources throughout the supply chain assumed the U.S. was nearing a trade deal with Canada, the largest supplier of aluminum to the U.S. This would have likely led to a steep decline in the Midwest Premium. However, ongoing friction has left the market to contend with the possibility that a deal may not occur anytime soon.
It ultimately remains uncertain how high the Midwest Premium will climb without a deal. In some relief to buyers, brokers have started reporting that current price levels have now reached replacement costs. Although margins appear thin for new material, this may signal that upside momentum could begin to slow as higher prices become increasingly difficult to justify. Buyers will also likely resist further increases absent a clear supply-side shock.
The more imports can penetrate the U.S. market, the greater the likelihood that the Midwest Premium will begin to stabilize, as incremental supply helps cap further gains and tempers near-term volatility.
Aside from the Midwest Premium, exchange prices also appear sensitive to supply-side dynamics. This comes as market participants increasingly focus on supply constraints centered in China, the world’s dominant aluminum producer.
After years of rapid growth, Chinese aluminum output has essentially hit the government-imposed capacity limit of 45 million tons per year, a policy established in 2017 to curb overcapacity, emissions, and excessive power consumption in the sector. In 2025, Chinese aluminum production climbed to roughly 45.02 million tons, just above the ceiling, signaling that the industry is operating at or near its historical limits. With production near this regulatory cap, the supply cushion that once kept prices suppressed is now largely gone, underpinning upward momentum in benchmark markets like the LME.
China’s export behavior has reinforced these bullish signals. Despite being the world’s largest aluminum producer, China’s shipments of refined aluminum and semi-fabricated products have declined. As domestic demand absorbed more metal and production hovered near constraint levels, exports fell by more than 9% year over year.
This contraction has helped tighten global supply, lifting LME aluminum prices to multi-year highs by removing what had historically been a significant, responsive source of incremental metal. That said, China remains a potential swing factor for market momentum, and its internal demand or production discipline could yet reshape price trends. For example, if Chinese domestic demand were to slow sharply due to weakness in manufacturing, autos or infrastructure, that could free up metal for export and ease global tightness.
Conversely, if China exceeds its stated production discipline and output grows past the capacity ceiling, either formally or informally, it could inject unexpected supply and temper recent gains. Goldman Sachs and other analysts have noted that the 45-million-ton cap is not a hard stop, leaving room for marginal expansion that could potentially create a larger surplus than currently anticipated.
As of mid-January, investor sentiment appears decisively positive. Data from the LME’s Aluminum Commitment of Traders Report shows that both net positioning and long positions among investment funds sit at their highest level since at least 2020.
These trends indicate that speculation is once again a dominant force in the aluminum market. Elevated fund length suggests investors are positioning for further price upside, mainly due to expectations of tighter supply conditions, supportive macro signals and the potential for additional policy- or energy-related disruptions. As a result, near-term price action may be increasingly influenced by financial flows rather than underlying physical demand alone, raising the risk of heightened volatility should sentiment shift.
However, it remains worth noting that a shift in sentiment among investors could reverse quickly if macroeconomic conditions deteriorate or physical market fundamentals fail to validate bullish expectations. Any signs of weakening demand, easing energy costs or an improvement in supply availability could prompt funds to unwind long positions, amplifying downside price risk.
Consequently, while speculative interest currently supports aluminum prices, the market remains vulnerable to sharp corrections if confidence falters.