Aluminium: A Tale of Two Supply Shocks

Research evidence excerpt

Aluminium: A Tale of Two Supply Shocks

Goldman Sachs Base Metals Analyst

of power from nickel to aluminium projects in industrial parks. This does not fully

offset the Middle East loss in 2026, but Indonesian supply growth underpins our

surplus forecast from 2027 onwards, reinforcing our medium-term bearish view

once Middle East production starts to recover.

n China adds to the supply offset. We raise our China primary aluminium production

forecast to 45.6Mt in 2026 and 46.3Mt in 2027, from 45.2Mt and 45.9Mt previously,

as strong industry margins support restarts, selected replacement projects and

some estimated overproduction above the headline cap (Exhibit 10). Recent data

suggest China output has already moved above the headline 45Mt capacity cap on a

run-rate basis (Exhibit 11). Expert feedback suggests the YTD strength could reflect

unauthorized overproduction, continued operation of old capacity under capacity

swap programmes and short-term potline intensification, while the production hit

from recent environmental inspections and reported curtailments appears relatively

small. This means China can provide another partial offset to lower Middle East

output in 2026/27 alongside Indonesia.

n Two-sided risks around Middle East supply recovery. Risks to our Middle East

supply recovery assumption are two-sided, although the announced interim deal to

reopen Hormuz has lowered the likelihood of a more severe disruption beyond

announced curtailments (Exhibit 12). A slower restart of damaged Middle East

capacity would remove around 500kt of 2027 supply versus our base case, keeping

the 2027 market fairly balanced and prices around $3,250/t. A faster restart would

add around 600kt of 2027 supply, lifting the surplus toward 1.2Mt and bringing

prices closer to $2,750/t.