China's aluminum production reached approximately 44 million tonnes in 2025, operating within just 2.3% of its statutory 45 Mt capacity limit. This policy-driven ceiling is the most significant structural supply constraint in the global aluminum market, effectively capping the world's largest producer's output.
The supply tightness extends beyond China. Global LME inventories have declined roughly 20% year-on-year, with total stocks (on-warrant plus off-warrant) falling from ~669,000 t at end-2025 to ~489,000 t by February 2026. European duty-paid premiums have surged from under $200/t over LME cash to over $340/t.
Demand remains robust across multiple sectors. The energy transition, EVs, and data center construction are providing structural tailwinds. The global aluminum market value is expected to grow from ~$181 billion in 2025 to ~$272 billion by 2034, a CAGR of 5.65%.
The World Bank's April 2026 Commodity Markets Outlook projects aluminum to average $3,200/mt for 2026, representing a 21.6% year-on-year increase from the 2025 baseline of $2,632/mt. Prices are forecast to ease to $3,000/mt in 2027.
Indonesian capacity additions are expected to begin easing tightness in H2 2026, with new smelting capacity gradually coming online. However, most analysts expect prices to remain above $2,700-2,800/mt even after the new supply enters the market.
With prices well above institutional forecasts, buyers should lock in H2 2026 requirements using LME forwards. The China capacity cap is a multi-year structural support. Layer hedges: fix 50-60% of needs at current levels, leave 40-50% flexible for potential H2 easing if Indonesian capacity ramps as expected. Monitor the European power cost situation closely.