China’s aluminum capacity cap, now entering its fifth year of enforcement, continues to constrain supply growth at a time when Gulf-region output is recovering from the Hormuz disruption. The cap limits total annual capacity to 45 million tonnes, and with current utilization at 96%, actual monthly output is approximately 3.8 million tonnes.
The structural cap means any supply disruption elsewhere in the world cannot be quickly offset by Chinese production increases. This asymmetry creates a price floor: when non-Chinese supply is disrupted, prices spike, but the recovery is incomplete because Chinese capacity cannot fill the gap.
New capacity in Indonesia and the Middle East is coming online, but at a slower pace. Indonesian smelters added approximately 1.2 million tonnes of capacity in H1 2026, but ramp-up delays mean effective output is below projections.
The combination of Chinese cap enforcement and measured non-Chinese capacity additions suggests the global aluminum market will remain in a structural deficit of 500,000-800,000 tonnes annually through 2027.
Do not expect a return to pre-crisis aluminum prices. The $3,300-3,500 floor is real and durable. For H2 2026, structure contracts with a $3,300 floor and flexible upside cap. The China cap is a long-term bullish factor, not a short-term trading signal.