Aluminium prices on the London Metal Exchange fell below $3,000 per tonne in October 2026 — their lowest level since February of that year — erasing the rally that had built through mid-2026 on the back of Middle East supply disruptions. At approximately $3,022 per tonne, aluminium was down more than 7% over four weeks, even as it remained around 10% above its level twelve months prior. The immediate drivers of the price decline are a convergence of supply-side developments: Middle East smelters that had been disrupted by the Iran-US conflict are restarting faster than markets had anticipated, Chinese aluminium alloy exports have surged to double their year-ago level, and the stronger US dollar has applied additional downward pressure on metal prices denominated in dollars. For India's aluminium casting industry — which depends on both primary and secondary aluminium as its core input — this price movement has a set of implications that are worth working through carefully.
Why the Middle East Restart Matters
The Middle East's role in global primary aluminium supply is significant and often underappreciated. Emirates Global Aluminium (EGA) — the Dubai-based producer that operates the Al Taweelah smelter in Abu Dhabi and the EMAL smelter in Abu Dhabi and Khalifa Industrial Zone — is among the world's ten largest primary aluminium producers. The Iran-US conflict disrupted natural gas supply chains in the region, affecting smelter operations across the Gulf. As these disruptions resolve and smelters restart — EGA confirmed that approximately a quarter of its Al Taweelah capacity had resumed operations — supply that markets had priced as absent returns to the global balance sheet. This is the proximate cause of October's price correction: the supply shock that supported higher prices through mid-2026 is unwinding faster than anticipated, and traders who had positioned for continued tightness are covering positions as the physical supply outlook improves.
China's Alloy Export Surge
The second major supply-side factor driving aluminium price weakness is China's sharply higher aluminium alloy exports. Through August 2026, Chinese alloy exports had doubled year-on-year to 4.46 million tonnes — a remarkable figure that reflects both the scale of China's aluminium production capacity and the strategic use of alloy export as a channel to circumvent the 30% export duty that applies to primary aluminium smelter output. By processing primary aluminium into alloys (which carry lower export duties) and exporting the alloyed product, Chinese producers are accessing global markets at higher volumes than primary export restrictions would allow. For global aluminium markets, this means a large incremental supply of Chinese-origin aluminium alloy — including casting alloys relevant to the Indian secondary sector — is finding its way into international trade flows, adding to the supply pressure that is weighing on prices.
What Lower LME Prices Mean for Indian Secondary Alloy Costs
India's secondary aluminium producers — who manufacture ADC12, LM25, LM6, and other casting alloys primarily from imported and domestic scrap — price their output with reference to LME aluminium, adding a conversion premium that reflects scrap procurement costs, processing costs, and margin. When LME aluminium prices fall, secondary alloy prices typically follow with a lag, as scrap prices adjust to reflect the lower primary metal benchmark. For Indian casting foundries that purchase secondary alloy ingot as their primary input, a sustained LME price decline translates into lower input costs — improving casting economics at the margin level, assuming finished casting prices to customers do not fall by the same proportion or more. The practical benefit to a Kolhapur foundry of a 7% LME price decline depends on the proportion of alloy cost in the total casting cost (typically 50–65% of cost of goods sold for an aluminium casting) and on how quickly its alloy supplier passes through the LME movement in its pricing.
The Risk: Price Volatility and Procurement Timing
Lower aluminium prices are broadly positive for Indian casting foundries in the short term, but the pattern of 2026 — a mid-year rally driven by geopolitical supply disruption followed by a sharp October correction as those disruptions resolve — illustrates the volatility risk that characterises aluminium markets when supply chain disruptions are the primary price driver. A foundry that locked in alloy supply contracts at mid-2026 price peaks now faces a cost disadvantage relative to competitors purchasing at spot. A foundry that held back inventory purchases expecting further price increases faces a different but real opportunity cost. Managing input cost exposure in a volatile aluminium market — through staggered purchasing, short-duration contracts, and maintaining sufficient inventory flexibility to respond to price movements — is a procurement discipline that becomes more valuable as LME volatility increases. For Indian casting SMEs that have historically purchased alloy on an informal spot basis from local secondary producers, developing a more systematic procurement approach is a practical risk management investment whose value the 2026 price cycle makes visible.