LME three-month aluminum crossed above $3,000 per tonne in early January 2026 and has maintained this level, supported by a rare combination of supply constraints and robust structural demand. Cash offers reached approximately $3,520/t in March before consolidating near current levels. Goldman Sachs revised its H1 2026 forecast to $3,150/t, up from $2,575/t, citing low global inventories and power availability concerns.
US trade policy is a dominant price driver. President Trump's escalation of aluminum import tariffs to 50% by mid-2025 has made the United States the world's most expensive aluminum market, with all-in prices (LME + Midwest premium) above $5,200/t. This has fragmented global trade flows: scrap imports into the US have increased, drawing material from Europe and prompting the EU to prepare measures to curb scrap leakage from spring 2026.
China's self-imposed 45 million tonne cap on primary aluminum production is a central structural constraint. Chinese output is now close to this ceiling, meaning additional demand cannot easily be met by Chinese capacity growth. This marks a fundamental shift — in previous cycles, China could ramp production to fill global deficits. That option is now largely closed.
New supply is coming mainly from ex-China sources, notably Indonesia, which is adding approximately 705,000 tonnes of new capacity in 2026, raising total output to 1.4 million tonnes. However, analysts judge this insufficient to fully rebalance the market before late 2026. Middle East producers with low-cost power are increasing capacity through recycling and incremental expansions, but large greenfield primary growth remains measured.
Demand remains resilient despite weak Chinese property. Consumption in China edged higher in 2025, with non-property sectors — transport, electrical, machinery, packaging — offsetting the real estate drag. Structural demand from EVs, charging networks, power grids, and data center construction is providing a strong floor under consumption growth.
With US all-in prices above $5,200/t and a global deficit of 140-365kt, buyers face a bifurcated market. US buyers should lock annual contracts with tariff-adjustment clauses and explore Canadian supply as a tariff-advantaged alternative. Buyers outside the US should secure H2 volume now — Indonesian capacity will not materially ease tightness until late 2026 at the earliest. Include CBAM compliance provisions in European contracts.