Global aluminum market is undergoing a major shift: the shortage is expected to come in 2026, with prices aiming for $3000 per ton!

Recently, global aluminum prices have shown strength, and behind this is the aluminum market undergoing a critical "rebalancing" - shifting from short-term surplus to scarcity. According to the latest research by Bank of America, the global aluminum market is expected to maintain a surplus of 316,000 tons by 2025, but by 2026, this situation will completely reverse, with a supply gap of 292,000 tons expected to appear. Aluminum prices are also expected to rise to $3000 per ton in the fourth quarter of 2026. What are the driving factors behind this "restructuring of supply and demand" in the aluminum market? And what insights does this provide for the industry and investors? 1. Market Rebalancing: Shortage is expected in 2026, with demand from Europe and the US being key The "shift signal" in the global aluminum market is first reflected in the imbalance of supply and demand. According to Bank of America's calculations, the aluminum market will continue to be in surplus from 2023 to 2025, but it will first experience a shortage in 2026, with the core drive coming from two major markets: 1. Recovery in demand from Europe and the US, stable consumption in China The shortage expected in 2026 depends largely on the recovery of demand from Europe and the US: American consumers currently do not bear the full 50% aluminum import tariffs, and future competition for aluminum purchases will intensify; the European market has shown signs of "bottoming out" rebound in demand due to fiscal stimulus policies. At the same time, China, as the world's largest consumer of aluminum, has been able to withstand pressure - support from the purchases of electricity grids, CECEP Solar Energy panels, and automobile manufacturers has kept domestic consumption strong, leading to historically high levels of aluminum demand in China. 2. Inventories at "multi-year lows," with hidden signals of premiums Although current regional physical premiums have not fully reflected "scarcity" (premiums in Europe and Japan have fallen in recent months, while premiums in the US have risen due to tariffs), global aluminum inventories have stabilized at multi-year lows, becoming the "hidden cornerstone" supporting aluminum prices. Bank of America points out that as US Midwest premiums gradually approach a "reasonable level of full tariff coverage" (consumers are now close to bearing the full tariff), and Europe may face a supply gap (the Mozal smelter in South Africa may shut down due to the expiration of power contracts, affecting 8% of imports to Europe), future global aluminum purchasing competition will further intensify, acting as a "catalyst" for aluminum price increases. 2. Slowing supply growth: China reaching a peak, Indonesia taking over but unable to change the tight balance Another key factor in the aluminum market shifting from surplus to scarcity is the significant slowdown in supply growth - global aluminum supply has only grown by 1.3% year-on-year since 2025, far below the 2.7% average annual growth rate of the past five years, which is a key reason why aluminum prices have remained resilient. 1. "Peak" for Chinese smelters: 45 million ton production capacity limit becomes a "hard constraint" As a major player in global aluminum production, China's smelting output has grown by 2.3% year-on-year since 2025, but has now reached the government's set 45 million ton production capacity limit. This means that future aluminum supply growth in China will "basically stagnate" and will no longer be a source of "incremental supply" for the global market. At the same time, Chinese aluminum exports have returned to a "long-term range" - due to limited capacity and the cancellation of export tax rebates, aluminum and aluminum product exports have dropped, further strengthening the fundamental support for markets outside of China. 2. Indonesia becomes the "source of new growth", but unable to change the tight balance Despite the slowing supply from China, Indonesia will become a major growth point for global aluminum supply in 2026 and beyond - it is estimated that by 2030, Indonesia's aluminum production capacity will increase by 1.7 million tons, primarily led by Chinese companies (such as Qinghai Group, Zhejiang Huayou Cobalt, and other projects in Indonesia). However, Bank of America emphasizes that even with Indonesia contributing to increased supply, the global aluminum market will still be able to "digest" this part of the supply, and the shortage situation in 2026 will not change - after all, aluminum is a "key metal" for global energy transformation (such as the surge in demand in areas like new energy vehicles and photovoltaics), and the contradiction between supply growth not keeping pace with demand growth will continue. 3. Scrap aluminum recycling becomes a "key breakthrough": Europe and the US face "scarcity anxiety," and global efficiency needs to be improved In the face of sluggish growth in primary aluminum supply, scrap aluminum (secondary supply) is becoming a focus of market attention - Bank of America predicts that by 2030, global aluminum demand compound growth rate will reach 3.7%, while the supply growth rate of scrap aluminum (4.6%-5.6%) will depend on the increase in recycling capacity, quality scrap aluminum supply, and recycling rates. 1. United States: Scrap aluminum imports hit a new high, prices continue to rise The United States imposes a 50% tariff on primary aluminum, but scrap aluminum imports are exempt, making the US scrap aluminum market "tight in supply and demand": on one hand, scrap aluminum prices have steadily risen in recent years, with the premium over primary aluminum continuing to increase; on the other hand, the amount of scrap aluminum imported into the US has reached a historic high, becoming an important supplement to offset the shortage of primary aluminum. 2. Europe: Exports of scrap aluminum exceed imports, idle capacity creates contradictions Europe is a "main area" for scrap aluminum recycling - about 40% of aluminum consumption comes from recycling, and the industry has invested 700 million euros in expanding recycling facilities, adding 1 million tons of recycling capacity. However, there are contradictions: In 2022-2023, nearly half of Europe's primary aluminum smelters closed due to high electricity prices, leading to reliance on imports to fill the gap; Shortage of scrap aluminum supply has resulted in about 15% of recycling capacity remaining unused, while scrap aluminum exports far exceed imports. Currently, there are differences within the European industry regarding "control of scrap aluminum exports": some institutions call for export fees to retain scrap aluminum, but recycling companies oppose "trade restrictions" (believing that current recycling exceeds local smelting demand, and low-grade scrap aluminum needs to be exported for digestion). Bank of America points out that the core solution in Europe is to "do both": not only expand recycling capacity, but also improve the supply of high-quality scrap aluminum. 3. Global consensus: Recycling rates must be increased Data shows that the global supply of scrap aluminum grows at an average annual rate of about 5% - if the recycling rate can be further increased, it may help alleviate the pressure of aluminum shortage in the market. For the global market, increasing the efficiency of scrap aluminum recycling is no longer a "choice", but a "must-answer question". Price forecasts and risk warnings: Aluminum prices are expected to reach $3000 per ton in 2026 Based on the analysis of supply and demand above, Bank of America has given a clear forecast for aluminum prices: the average price of London Metal Exchange (LME) aluminum spot in 2025 is expected to be $2588 per ton, and it is projected to rise to $2875 per ton in 2026, with the target of reaching $3000 per ton in the fourth quarter of 2026. 1. Core bullish factors Supply and demand gap: A shortage of 292,000 tons is expected in the global aluminum market in 2026, and the gap may widen; Energy transition: Demand for aluminum continues to grow in areas such as new energy vehicles, photovoltaics, and power grids; Supply constraints: China's capacity has reached a peak, and global primary aluminum supply growth is weak. 2. Risks to be wary of Trade risks: Escalation of global trade disputes may impact market sentiment and affect aluminum imports and exports; Unexpected supply: China or other regions breaking through capacity constraints, resulting in increased primary aluminum supply; Weak demand: If the economic recovery in Europe and the US is slower than expected, it may drag down aluminum consumption growth. In summary, the global aluminum market is at a crucial turning point from surplus to scarcity - the supply gap, low inventories, energy transition demand, together form the "fundamental support" for rising aluminum prices, while scrap aluminum recycling is an "important lever" to alleviate the scarcity. For the industry, Indonesian capacity, recycling technology, and the supply of high-quality scrap aluminum will be the core of future competition; for investors, it is important to closely monitor the pace of demand recovery in Europe and the US, changes in Chinese supply policies, and the path to achieving the target of $3000 per ton for aluminum prices.