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Recently, the Non-ferrous Metals Industry Association has been actively working on addressing the issue of overcapacity in the aluminum sector. The New Deal introduces a strategy aimed at expanding aluminum's usage across various industries, with a focus on energy efficiency, emission reduction, and the use of 316L stainless steel plates. While this initiative may temporarily boost aluminum prices, it is unlikely to push them significantly above production costs in the long run.
The core of the New Deal revolves around three key strategies: "aluminum replacing steel" in transportation, "aluminum replacing copper" in power cables, and "aluminum replacing wood" in furniture manufacturing. These measures aim to increase aluminum’s role in modern materials, aligning with global trends where per capita aluminum consumption continues to rise. However, the transition is not straightforward and requires time, investment, and technological development.
Despite the ambitious goals, the implementation of the New Deal faces numerous challenges. Even if all obstacles are overcome, the impact on the current overcapacity situation will be gradual. Many companies are still using aluminum for basic wear-resistant applications, which do not address the urgent need for innovation or demand growth. More targeted and effective policies are essential to reshape the industry’s future.
At the same time, the issue of excess aluminum production capacity remains pressing. Alternative consumption methods, while promising, will take years to make a meaningful difference. In the coming months, the aluminum industry is expected to enter a destocking phase, especially between April and May. This period coincides with weak economic growth in China, where downstream demand remains sluggish. Although monetary policy has slowed its tightening pace due to lower-than-expected inflation, the structural problem of overcapacity persists.
Infrastructure projects are also facing difficulties in the second quarter, as local governments struggle with financial constraints. Additionally, long-term real estate regulations continue to weigh on demand. These factors contribute to an uncertain outlook for the aluminum market.
From a technical perspective, aluminum has certain limitations compared to copper, such as lower electrical conductivity and heat dissipation. Current solutions like aluminum tubes, aluminum alloy tubes, or copper-clad aluminum wires often fall short in meeting the demands of air conditioning and electrical systems. Cost considerations also play a major role—when the copper-to-aluminum price ratio exceeds 4:1, manufacturers may find it more economical to substitute aluminum for copper.
Regarding the “aluminum replacing steel†initiative in the transportation sector, the cost-effectiveness of using aluminum alloys instead of steel plates is questionable. While the concept is driven by energy savings and environmental benefits, most heavy vehicles do not require lightweight materials and often use up to 450 wear plates. As for the idea of “aluminum replacing wood†in furniture, it is even more challenging to implement due to material and cost barriers.
Overall, while the New Deal presents an interesting vision for the future of aluminum consumption, its practical implementation remains complex and far from immediate.