Supply: Capped China, Sanctions, and Smelter Disruptions
China’s self-imposed 45Mt/yr capacity cap is the structural backbone of aluminum tightness. Output grew from 12.6Mt in 2007 to nearly 45Mt today, but the cap limits further growth. Outside China, few large restart projects exist because smelters must compete with higher-paying AI data centers for long-term power contracts.
Sanctions on Russian metal have reshaped global trade flows. Russian primary aluminum accounts for ~90% of LME inventories, but Western buyers have largely self-sanctioned, redirecting flows to China and Asia. This means headline LME stocks overstate effective availability to European and North American buyers.
Disruptions compound the picture. Century’s Nordural Iceland smelter idled two-thirds of production (11–12 month restart). Mozal in Mozambique faces power and operational risks. Indonesia’s 705kt of new capacity helps but is unlikely to offset the deficit until late 2026.
[FACT] LME 3-month aluminum reached $3,538/mt on April 28, 2026. [ESTIMATE] Effective Western-available aluminum is significantly tighter than headline balances suggest due to Russian stock segregation.
Demand: EVs, Data Centers, and Grid Modernization
Aluminum demand from EV manufacturing drove >20% price appreciation in 2025 and continues into 2026. Data-center construction adds a new, fast-growing consumption stream for power infrastructure, cooling systems, and building components. AI data centers also compete directly with smelters for long-term power contracts.
China’s demand is still projected to grow ~2% in 2026, supported by solar, EVs, and grid expansion, partially offsetting weakness in real estate. India and Southeast Asia are emerging as incremental demand centers. Global demand growth is reinforced by energy-transition infrastructure in all major regions.
[FACT] Global aluminum demand rose >20% in 2025. [ESTIMATE] Data-center and AI-related aluminum demand could represent incremental consumption of 500kt–1Mt annually by 2027.
Price Scenarios: H2 2026
Base Case ($3,200–3,800/t): Tight but slightly easing market as Indonesian tonnage ramps. Russian metal continues to distort LME stocks. Premiums for non-Russian, low-carbon material remain elevated. Probability: ~50%.
Bull Case ($3,800–4,200/t): Slower Indonesian ramp, further smelter disruptions, or stronger demand from data-center construction. Sustained prices above $3,500/t with regional premiums adding $200–500/t. Probability: ~25%.
Bear Case ($2,800–3,200/t): Indonesian capacity delivers faster than expected, Chinese real estate deteriorates further, or sanctions regime eases. Probability: ~25%.
Decision Matrix
| Action | Role | Timeline |
|---|---|---|
| Extend fixed-price contracts through Q4 2026 before premiums rise | Procurement | June 2026 |
| Qualify non-Russian suppliers (Norway, Iceland, Canada) | Supply Chain | Q3 2026 |
| Model $500/t premium for low-carbon aluminum in budget | CFO | July 2026 |
| Evaluate LME hedging for H2 2026 exposure | Treasury | Q3 2026 |
| Monitor Indonesian capacity ramp milestones | Market Intel | Monthly |
The effective supply available to Western buyers is tighter than LME headlines suggest. Russian metal dominates exchange stocks but is not accessible to sanction-observant procurement teams. Buyers should lock in non-Russian, low-carbon supply contracts early, expect elevated regional premiums ($200–500/t above LME), and model a $3,200–3,800/t range for H2. Indonesian capacity is the key swing factor to watch.