Commodity Evolution – Newsletter February 2025

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Primary Aluminum: Strengthening Fundamentals, Physical Markets Increasingly Selective

The global primary aluminum market is currently operating in a complex equilibrium, with structurally bullish signals in the medium term coexisting with still–fragmented short-term dynamics. The emerging picture is of a market supported by fundamentals, yet held back by physical demand that, especially in mature markets, remains selective and price-sensitive.

China: From Marginal Surplus to Risk of Deficit

The starting point remains China, where total primary aluminum supply reached approximately 46.6 million tonnes in 2025, essentially in line with domestic consumption. The slight surplus estimated for the current year already appears to be a statistical residue rather than a true market buffer.

Looking ahead to 2026, the dynamics are changing significantly. Domestic production growth is set to slow further as the system approaches the regulatory ceiling of 45 million tonnes, while the contribution of imports also appears uncertain. Foreign projects, particularly in Indonesia, are progressing slowly due to energy constraints, while in Europe and North America, electricity costs continue to threaten production stability.

On the demand side, however, resilience remains evident. Automotive, photovoltaic, power grids, and energy storage continue to provide a solid structural foundation, potentially pushing the Chinese market into deficit in 2026. In this context, Mysteel’s expectations for strengthening domestic prices appear consistent with a market gradually losing its flexibility.

Primary Aluminum Production in China – Powered by Commodity Evolution

Europe: Premiums Sideways, But Market Increasingly Polarized

While global fundamentals tell a constructive story, the European premium market reflects a more fragmented reality. P1020A premiums in Rotterdam remain broadly sideways, but with increasingly widening ranges, a sign of growing segmentation by production type.

Coal-based material is progressively penalized, with discounted sales widening the lower end of the ranges, while gas-based and low-carbon aluminum continues to defend high premiums. This is not a generalized weakness, but rather an increasingly clear selection pattern, reflecting evolving industrial preferences and the anticipation of the impact of the CBAM.

In the short term, the availability of duty-paid metal remains relatively abundant and represents a brake on decisive directional movements. However, the underlying sentiment remains constructive: many operators believe that, once the remaining 2025 inventories are absorbed, premiums will necessarily need to more fully incorporate emissions-related costs.

Duty-Unpaid: Tension in Non-Coal and Difficult Coverage

Segmentation is even more evident in the duty-unpaid market. Here, coal is experiencing marked downward pressure, while non-coal metal is showing signs of actual physical scarcity. The difficulties encountered by operators in sourcing units compliant with contractual specifications have led to anomalous situations, such as the use of duty-paid metal to cover duty-unpaid positions.

This imbalance highlights a crucial aspect: beyond average premium levels, the real constraint on the European market is becoming the emission quality of the supply, rather than the overall availability of tonnage.

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P1020A Aluminium Premium – DDU – Rotterdam – Powered by Commodity Evolution

Asia: Premiums Anchored to Benchmarks, Demand Still Weak

In Asia, the premium market is moving defensively. The Japanese MJP quarterly premium continues to act as an anchor for the entire region, supporting valuations even in the absence of particularly buoyant spot demand.

In Japan, purchases remain subdued, and spot premiums remain structurally below quarterly levels, consistent with stable but lacking momentum demand. In South Korea, the premium adjustment appears more a technical realignment to the Japanese fixing than a reflection of improving consumption.

Finally, in China, an increasingly clear gap is emerging between theoretical levels and prices actually acceptable to the market. The seasonal slowdown linked to the Lunar New Year is accentuating buyers’ caution, squeezing liquidity and pushing premiums toward selective adjustments rather than a generalized repricing.

Prices and Premiums: Two Different Times

The key element that emerges from the joint analysis is the temporal misalignment between prices and physical premiums. Primary aluminum fundamentals, particularly on the supply side, point to price strengthening in the medium term.

Physical premiums, however, remain anchored to short-term dynamics: inventories, seasonality, and qualitative segmentation. This explains why the market appears sideways and fragmented today, while preparing the conditions for a more structural adjustment in the coming months.

Scenario for the Next Month: Apparent Stability, Pressures Building

In the coming month, the most likely scenario is continued sideways movement in premiums, accompanied by a high degree of price dispersion based on the metal’s origin and emission profile. No sharp directional movements are expected in the very short term, but upward pressures remain latent, especially for non-coal-based materials.

Regarding LME prices, the fundamental context suggests greater resilience compared to other industrial metals. Any corrections should remain limited, with the market continuing to price in the risk of tighter future supplies.

LME Primary Aluminum: After the Rally, February Opens with Consolidation and Strength Tests

The month of January ended with a clear signal on the LME primary aluminum chart: after an orderly and persistent upward trend, the market suddenly slowed, giving way to a sharper correction. The movement, visually evident in the final part of the chart, does not appear to be a structural reversal, but rather a physiological profit-taking after weeks of almost uninterrupted growth.

The trend that accompanied aluminum from late autumn to early 2026 remains well-defined. Prices have constructed a sequence of higher lows and higher highs, supported by a progressive improvement in sentiment and by fundamentals that, especially on the supply side, continue to suggest a less abundant market than in previous years. The acceleration seen between December and January led prices to push above the $3,300/t area, before encountering technical and psychological resistance that triggered the recent correction.

The return to the $3,050/t area, where the latest settlements were recorded, now represents a key step. This zone coincides with an initial level of dynamic support, as well as an area where the market had previously consolidated before the final bullish leg. Price reaction at these levels will be crucial in setting the tone for February.

Momentum-wise, indicators show a clear cooling from January’s peaks. The negative swing observed in recent days suggests that the market is unloading some of its accumulated excesses, but without yet compromising its underlying structure. In other words, aluminum appears to be entering a phase of normalization, rather than structural weakness.

LME Aluminum – 3 month $/ton February 2026: A Month of Adjustment, Not a Reversal Looking ahead to February, the most likely scenario is a market focused on consolidating recent gains, rather than immediately rebounding. Physical demand, especially in Europe and Asia, is expected to gradually recover after the seasonal pause, but it is unlikely to be sufficient, in the very short term, to sustain a new directional surge without intermediate absorption phases. At the same time, fundamentals remain favorable. Uncertainties about global supply, energy constraints in some production areas, and the growing segmentation of the primary market continue to provide an implicit floor for prices. This reduces the likelihood of a deep correction and reinforces the idea that any declines could attract new purchases. Price Target for February 2026 In this context, the month of February could develop within a well-defined range: Main support: $3,000–$3,050/t         Key holding area. A drop below these levels would open up broader corrective opportunities, but for now, a secondary scenario appears. Expected central range: $3,050–$3,150/t         This range is where the market could spend much of the month, alternating between rebounds and consolidation. Resistance and upside target: $3,200–$3,250/t         A return above these levels would require a significant improvement in sentiment or new fundamental catalysts. If a breakout occurs, the market         would once again price in a more aggressively bullish scenario. Conclusion: A Pause That Strengthens the Trend Primary aluminum enters February not as a struggling market, but as a market taking a break after a strong run. The chart tells a story of underlying strength, temporarily challenged by technical profit-taking and a natural rebalancing of indicators. If current support holds, February could become a month of construction, a silent accumulation phase that will set the stage for subsequent moves. In the absence of negative macroeconomic shocks, the medium-term structure remains intact, with aluminum continuing to trade at historically high levels and a bias that, while more cautious, remains constructive.   Commodity Evolution is the ideal solution to support the budgeting and negotiation activities of your corporate purchasing department. Access to the platform allows you to view real-time prices and comprehensive market information for metals, steel, scrap, and many other sectors, with more than 1,500 products. Request a Free Demo Disclaimer This document was prepared by Commodity Evolution. It is intended for consultation by those to whom it is addressed and, in any case, is not intended to replace the personal judgment of those to whom it is addressed. While Commodity Evolution has taken the utmost care in preparing this document and believes its contents to be reliable, it assumes no responsibility for the accuracy, completeness, or currency of the data and information contained therein or on the resources and data used to prepare it. Consequently, Commodity Evolution declines all liability for errors or omissions. The opinions, forecasts, or estimates contained in this document are expressed exclusively as of the date of this document’s preparation, and there is no guarantee that future results or any other future events will be consistent with the opinions, forecasts, or estimates contained herein. Any information contained in this document may be subject to changes or updates after the date of its preparation, without any obligation to communicate such changes or updates to those to whom this document has previously been distributed. This publication is provided to you for information and illustration purposes only and does not constitute a public offering of financial products or a promotion of investment services and/or activities, either to residents of Italy or to residents of other jurisdictions. Neither Commodity Evolution nor any of its directors, representatives, or employees assumes any liability, in whole or in part, for any damages (including, but not limited to, damages for loss of profits, business interruption, loss of information, or other economic losses of any nature) arising from the use, in any form and for any purpose, of the data and information contained in this document.