Aluminium prices are set to stay elevated near-term as West Asia outages persist into 2027, but stronger supply growth from Indonesia and China will push the market back into surplus next year, according to a research report by Goldman Sachs on commodities. The bank also maintained its bearish stance over the medium term.
West Asia Supply Losses Persist
Goldman Sachs said the West Asia supply losses will persist longer than initially assumed. "Since our last update, industry feedback and company announcements point to a slower recovery in the West Asia production than we had initially assumed," the report stated. Even if the Strait of Hormuz reopens under the announced interim deal, smelters cannot immediately return to full capacity as damaged potlines need repairs and curtailed capacity must be restarted gradually.
The bank downgraded West Asia output by 660kt in 2026 and 1Mt in 2027, assuming damaged capacity restarts in early 2027 rather than H2 2026. It now expects Bahrain output to return to pre-conflict levels by mid-2027 and UAE by end-2027.
This near-term shock tightens the market balance. Goldman Sachs now expects the global aluminium market to post a 720kt deficit in 2026 and a 590kt surplus in 2027, versus a prior 570kt deficit and 1.3Mt surplus.
Supply Offset from Indonesia and China
"This is the tale of two supply shocks: a near-term West Asia shock that tightens the 2026/2027 balance and supports near-term prices, set against a structural China-backed supply wave, led by Indonesia, that increasingly offsets the disruption over time and keeps us bearish further out," the bank said.
Goldman Sachs raised its Indonesian primary aluminium production forecast to 1.7Mt in 2026 and 2.9Mt in 2027 from 1.6Mt and 2.5Mt previously, citing faster ramps at Adaro, Taijing Morowali, and Juwan Weda Bay. Indonesian output is already up around 89% year-on-year year-to-date. For China, the bank raised its 2026/2027 production forecasts to 45.6Mt/46.3Mt as strong margins support restarts and overproduction above the 45Mt capacity cap.
| Metric | Prior Forecast | New Forecast |
|---|---|---|
| West Asia output cut 2026 | – | 660 kt |
| West Asia output cut 2027 | – | 1 Mt |
| Global balance 2026 | 570 kt deficit | 720 kt deficit |
| Global balance 2027 | 1.3 Mt surplus | 590 kt surplus |
| Indonesian output 2026 | 1.6 Mt | 1.7 Mt |
| Indonesian output 2027 | 2.5 Mt | 2.9 Mt |
| China output 2026 | – | 45.6 Mt |
| China output 2027 | – | 46.3 Mt |
| LME aluminium Q3 2026 | $3,200/t | $3,300/t |
| LME aluminium avg 2027 | $2,750/t | $2,950/t |
Price Outlook and Risks
On prices, Goldman Sachs nudged its Q3 2026 and average 2027 LME aluminium forecasts higher to $3,300/t and $2,950/t respectively, from $3,200/t and $2,750/t, but remains below forwards at $3,400/t and $3,250/t. The bank closed its short Dec-26 LME aluminium trade and rolled to a short Dec-27, “where our forecast sits furthest below the forward and best expresses our structural surplus view.”
Risks remain two-sided: a slower West Asia restart would keep 2027 fairly balanced around $3,250/t, while a faster restart could lift the surplus toward 1.2Mt and push prices closer to $2,750/t.
Sources:
