The global aluminum market has shifted from two years of surplus to a structural deficit in 2026, driven by a tightening web of supply constraints. ING projects a deficit of approximately 200,000 tonnes this year, following a 100,000-tonne shortfall in 2025. LME warehouse stocks have tightened dramatically: US LME warehouses held zero aluminum as of October 2025 after the last 125 tonnes were withdrawn, and global domestic stockpiles now stand at only about one month of consumption.
Smelter shutdowns and curtailments tied to power and energy-price issues are accelerating. In Mozambique, disruption at the Mozal smelter has had outsized regional impact. In Europe, persistently high energy costs continue to pressure margins, though smelters that survived the 2022 crisis have adapted through hedging and efficiency measures. However, the risk of further capacity cuts remains elevated if power prices spike again.
Indonesia's much-anticipated capacity expansion is proving insufficient to fill the gap. While the country is adding 705,000 tonnes of new primary capacity — raising total output to 1.4 million tonnes — this is well below the rate needed to offset constrained Chinese supply and global demand growth. The pace of Indonesian ramp-up has been slowed by power availability concerns and infrastructure bottlenecks.
Treatment charges and premiums reflect the tightness. The Midwest premium in the US has hit record levels, with the all-in US price exceeding $5,200/t. In Europe, duty-paid premiums have also risen sharply, though not to US levels. The SHFE premium over LME suggests continued Asian demand strength.
Demand growth for primary aluminum continues at an estimated 2.1% annually through 2040, driven by the energy transition. EVs use significantly more aluminum than internal combustion vehicles for lightweighting. Grid infrastructure, solar panel frames, and data center cooling systems are additional structural demand sources that are insensitive to short-term economic cycles.
The aluminum deficit is real and structural, not a temporary squeeze. Buyers should treat current price levels as the new floor rather than a peak. Pre-position inventory during Q2 seasonal dips. Lock long-term contracts with low-carbon producers ahead of full CBAM implementation in Europe. Include tariff escalation clauses in supply agreements to manage continued US policy volatility. Monitor Indonesian ramp-up progress as a potential easing signal for late 2026.