Aluminum: From Deficit to Oversupply

Research evidence excerpt

Aluminum: From Deficit to Oversupply

Global FoundationM

Investment Summary

We are turning more cautious on aluminum equities into any near-term recovery,

particularly for producers, where earnings and multiples remain most exposed to

normalising LME aluminum prices and regional premiums. The key change versus our prior

view is not that the Middle East disruption was temporary — that was always our

assumption — but that the restart now appears to be occurring faster than initially

expected, while rest-of-world supply additions are also progressing more quickly. In our

view, this shifts the aluminum market from a modest deficit in 2026 to a clearer surplus in

2027/28.

The Middle East conflict was the most important aluminum supply-side event in 2026. At

its peak, the disruption removed around 3.5 Mt of annualised capacity, equivalent to 4.0–

4.8% of global capacity. This supply shock is now reversing faster than expected, with

most affected Middle Eastern capacity assumed to return by end-1H27. At the same time,

elevated aluminum profitability is incentivising a new wave of greenfield and brownfield

supply, particularly in Indonesia. With aluminum returns improving while nickel remains

loss-making, some operators are reallocating power from nickel to aluminum. We now

expect Indonesia to add 0.8Mt, 1.3 Mt and 1.3 Mt of production in 2026, 2027 and 2028,

respectively. For the rest of the world, we forecast additions of 440 kt, 835 kt and 905 kt

over the same period, with key 2027 projects including Saudi Arabia at 260 kt, India at

300 kt and Angola at 190 kt. In total, we expect around 2.1 Mt of new global supply in

2027, excluding Middle East restarts.

As a result, our commodities team expects the market balance to deteriorate materially

beyond 2026.