Aluminum Slumps to 12-Week Low as Strong Dollar Hits Metals Market

Aluminum prices fell sharply on Thursday as a stronger US dollar, elevated bond yields and thin holiday trading in China combined to pressure the industrial metals complex. The three-month London aluminum contract dropped around 1.5% in early European trading to near $3,121 per metric ton, after touching about $3,116, its weakest level since early July.

The move made aluminum one of the clearest stress points in the metals market, even as traders continued to track supply risks across the broader base metals complex. With Chinese markets closed for the National Day holiday, liquidity was lighter and price action was more exposed to macro drivers from the dollar, Treasury yields and energy costs.

Dollar Strength Becomes the Main Metals Headwind

The latest slide in aluminum came as the dollar held near multi-month highs, making dollar-priced metals more expensive for buyers using other currencies. That currency effect was amplified by another rise in global borrowing costs, which has kept speculative appetite restrained across commodities.

Industrial metals have also been under pressure from signs of uneven demand in China, the world’s largest consumer of raw materials. Recent manufacturing signals have been mixed, while weak industrial profit data has kept investors cautious about near-term restocking momentum. For aluminum, the absence of Chinese trading this week removed a key source of physical-market direction just as macro pressure intensified.

Aluminum Tests Support as Supply Signals Stay Mixed

The aluminum market is not facing a simple bearish supply story. Inventories in parts of Asia have remained relatively tight, and some production issues outside China have kept traders alert to possible disruptions. However, those supportive factors were not enough to offset the impact of a firmer dollar and rising yields during Thursday’s session.

Energy prices are another important variable for aluminum because smelting is power-intensive. Higher energy costs can support production expenses, but they can also weigh on global industrial demand if they tighten financial conditions and squeeze manufacturers. That tension has left aluminum vulnerable to two-way volatility rather than a clean fundamental trend.

Fed Expectations Keep Traders Defensive

Markets are still weighing whether softer inflation readings will be enough to prevent another Federal Reserve rate increase. For metals, the problem is that even a less aggressive Fed outlook has not yet produced a decisive retreat in yields. As long as real borrowing costs remain elevated, non-yielding and industrial commodities may struggle to attract fresh bullish flows.

For aluminum traders, the near-term focus is now whether prices can stabilize above the latest 12-week low or whether a break lower encourages more liquidation across base metals. A recovery would likely require either a softer dollar, calmer bond markets or stronger evidence that China’s post-holiday demand is improving.

Until then, aluminum is likely to remain a key barometer for risk appetite in the metals market. The latest decline shows that supply concerns can still be overshadowed when currency strength, higher yields and fragile industrial sentiment move in the same direction.