A wave of smelter outages across the Gulf region is compounding the structural tightness in the global aluminum market. Multiple facilities in the United Arab Emirates and Bahrain have reported reduced output due to unplanned maintenance and power supply constraints during the summer peak demand period. These outages remove approximately 150,000-200,000 tonnes of annual capacity from the global supply pool at a time when inventories are already at multi-year lows.
China's aluminum production cap of 45 million tonnes per year remains the single most important structural constraint on global supply. With Chinese output at approximately 43-44 million tonnes in 2025, the cap effectively removes 2-3 million tonnes of potential incremental capacity from global markets each year. This policy-driven constraint has forced demand fulfillment through higher-cost supply sources in Indonesia and the Middle East, with longer development timelines and elevated logistics costs. The European Union's Carbon Border Adjustment Mechanism (CBAM), which took full effect in 2026, is further reshaping trade patterns by imposing carbon costs on imported aluminum.
Indonesian smelter expansion projects represent the most significant new capacity additions scheduled for 2026-2027. Multiple Chinese-financed plants are in advanced stages of construction, targeting combined annual capacity of 1.5-2 million tonnes. However, full market integration requires 18-24 months from commissioning, meaning the supply relief from these projects will not materialize until late 2027 at the earliest. In the interim, the market remains exposed to further supply disruptions and price spikes.
Aluminum buyers should extend contract coverage through Q4 2026 given the extended timeline for new Indonesian capacity. The combination of Gulf outages, China's cap, and CBAM implementation creates a multi-layered supply risk. Consider premium-grade contracts that include CBAM compliance guarantees.