I. Price Trend
In December 2025, international aluminum prices moved within a range but strengthened toward month-end. Early in the month, prices were slightly softer as pre-holiday adjustments weighed on sentiment. In the middle to latter part of the month, rising expectations of supply-side disruptions and earlier-than-usual restocking demand helped prices stabilize and climb into the close. As the EU’s CBAM enters its definitive phase starting in 2026, procurement costs may rise structurally, driven by low-carbon aluminum premiums and heightened disclosure requirements.
LME aluminum prices in December 2025 likewise showed range-bound trading with a firmer close. The three-month contract recorded a monthly high of about US$2,990 per tonne and a low of about US$2,867 per tonne, with an average of roughly US$2,910 per tonne—indicating that despite intermittent pullbacks, the overall price center remained resilient. The cash price moved in line with the three-month contract, posting a high of about US$2,968 per tonne and a low of about US$2,832 per tonne, with an average of roughly US$2,875 per tonne. On inventories, LME registered warehouse stocks continued to draw down, declining from approximately 537,900 tonnes on December 1 to about 511,750 tonnes on December 31, a month-on-month decrease of roughly 4.86%, which provided a degree of support for prices. On the FX front, USD/TWD fluctuations were limited in December; the exchange rate served as a secondary factor for import costs denominated in U.S. dollars, while the primary drivers remained the aluminum price level itself and the timing of procurement.
II. Analysis of Key Market Drivers
A. Supply Side: Yunnan Dry-Season Risk
In December, Yunnan entered the dry season, heightening concerns over unstable hydropower supply and increasing market attention on potential supply disruptions. Elevated supply-side risk helped provide support for aluminum prices.
B. Demand Side: Pre–Lunar New Year Stockpiling
With the 2026 Lunar New Year falling in mid-February, downstream processors began bringing forward raw-material purchases and production scheduling in the latter part of December. This supported spot demand and strengthened bargaining dynamics around lead times.
C. Cost and Policy: Alumina and CBAM
Alumina prices remained volatile in December. Changes on both the supply and trading fronts kept cost support in place, while the subsequent trend depended on the pace of supply normalization and demand strength. On the policy side, as CBAM enters its definitive phase starting in 2026, compliance and disclosure requirements for low-carbon materials are set to tighten, which may make low-carbon premiums and related contract clauses increasingly standard.
III. Outlook
Aluminum prices appear to have limited downside, while the upside will depend on risk events and investor sentiment. If additional catalysts emerge from the supply side or policy developments, prices could break out of the trading range and accelerate higher. LME registered warehouse inventories declined from early to late December, ending the month at around 510,000 tonnes. Continued inventory drawdowns make it easier for the market to price aluminum under a “tighter supply” narrative.
In December 2025, the global aluminum market exhibited a typical year-end pattern of “range-bound volatility with a bullish consolidation.” Early in the month, prices mostly moved sideways amid subdued trading around the U.S. and European holidays and inventory adjustments. As the market moved into mid-to-late December, risk appetite improved and inventories continued to draw down, providing buying support on each pullback and allowing prices to finish the month on a stronger note. Overall, December was not a weak market driven by a demand collapse; rather, it was a bullish, range-trading environment characterized by “clear downside support and upside awaiting catalysts,” laying the groundwork for a constructive tone into the first quarter of 2026.
On the supply side, market attention centered on seasonal and policy-related risks in parts of China, particularly the uncertainty in energy supply during the dry season, which can expand supply-side risk premiums in Q1 and underpin aluminum prices. On the demand side, the market showed a structure of “softer in the U.S. and Europe, relatively steady in Asia.” As pre–Lunar New Year stocking and production scheduling gradually picked up in the latter part of the month, spot markets became more sensitive to lead times and premiums, strengthening physical demand’s support for prices. From a cost perspective, alumina and energy costs remained key underlying supports; despite short-term volatility, the cost curve continued to constrain downside risk as long as supply–demand conditions did not weaken materially.
Policy and compliance trends also became more clearly embedded in pricing and negotiation frameworks during December. With the definitive phase of CBAM approaching from 2026 onward, market inquiries, disclosure requirements, and compliance pressures around low-carbon materials became more tangible, reinforcing the trend toward “institutionalizing” low-carbon premiums and related contract clauses. In comparison, the exchange rate’s impact on costs in December was relatively marginal. Instead, inventory drawdowns, supply risk, and expectations of rising compliance costs were the core forces behind the market’s firmer year-end consolidation.
