China aluminium prices trended lower through late May, with Mysteel regional A00 ingot averages retreating between 1.38 per cent and 1.45 per cent month-on-month. The market remained locked in a tug-of-war between macro headwinds and fundamental resilience.
While persistent rate hike expectations capped upside potential, continuous inventory destocking anchored the price floor, limiting the downside. Heading into June, prices are expected to remain under pressure from the prevailing macro backdrop; however, tightening supply-demand dynamics will likely contain the decline within a limited range.
On the macro front, sentiment experienced a sharp shock. Mid-month, both US April inflation data and PPI significantly exceeded expectations, triggering a rapid cooling of market rate cut bets and a sudden surge in rate hike expectations. Rising US treasury yields fuelled concerns over liquidity tightening and suppressed risk appetite, emerging as the dominant macro bearish factor and weighing on aluminium prices.
In the LME market, supply shortage dominated overseas performance throughout the month. Production cuts in the Middle East led to sustained overseas inventory drawdowns, reinforcing supply tightening expectations, which drove LME aluminium to accelerate upward and continuously hit new highs. Domestically, fundamentals continued to send positive signals. Traders’ aluminium inventories maintained a destocking trend. Downstream demand recovered steadily, and export performance showed growth.