Global Metals Weekly Aluminium supply is falling

Global Metals Weekly Aluminium supply is falling

We expect an aluminium market deficit in 2026 18 September 2026

The aluminium rally came to an abrupt halt in 2Q26 as 1) China’s smelters raised Commodities production to an annualised rate of 48.3mt; 2) output in Indonesia increased; and 3) Global market participants anticipated that an MOU between the US and Iran would release Global Commodity Research trapped aluminium, while facilitating a rebound in Middle Eastern production. However, BofA Europe (Madrid) all of these supply increases have fallen short of what was originally priced in by the Michael Widmer market. We therefore still expect a deficit this year, though followed by a small surplus Commodity Strategist MLI (UK) next year, which should develop as more Indonesian supply hits the market in 2H27. While renewed escalation of the US-Iran war and higher energy prices are near-term Danica Averion risks, we think aluminium could rebound in the coming weeks before facing downward Commodity Strategist pressure next year. MLI (UK)

China’s exports off the highs; pent-up US demand Francisco Blanch Commodity & Deriv Strategist Indonesia does not publish production data, but exports are a good proxy, in our view. BofA Europe (Madrid) Smelters were exporting and producing at an annualised rate of 1.4mt in July. Extrapolating from developments during the first seven months implies CY26 production Clifton White of around 1.2mt, well below the +2mt factored in by consensus. Meanwhile, China Commodity Strategist BofAS churned out 48.3mt annualised of aluminium in June, but production fell to 46.6mt in August. Accompanying that, aluminium inventories and exports have fallen sequentially, Daryna Kovalska confirming a rebalancing of the domestic market, despite weak demand. Either way, we Commodity Strategist MLI (UK) think consumption should accelerate once grid spending bottoms out. Rachel Wiser LME warehouses are not set up for increased demand Commodity Strategist BofAS European demand has been weak, but sectoral activity in the US suggests aluminium usage has held up. While President Trump had floated the idea of a 25% tariff on Equity Research Canadian aluminium, a layered tariff did not work during the first term and consumers Jason Fairclough >> Research Analyst ended up paying the full 10% mark-up then. Uncertainty over tariffs has once again MLI (UK) meant that consumers have been holding back, resulting in pent-up demand. Should that

demand materialise, we don’t think LME is well set up to absorb it. Inventories are low Caio Ribeiro >> Research Analyst and virtually all of the material still in warehouses is from Rusal, making it less attractive Merrill Lynch (Brazil) for consumers in the US and Europe. While a rebound in consumer hedging demand may help ease some of the backwardation tentatively, we are concerned that the lack of Matty Zhao >> Research Analyst physical liquidity could ultimately lead to a squeeze. Merrill Lynch (Hong Kong) See Team Page for List of Analysts

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Aluminium supply is falling We expect a deficit in 2026 Aluminium prices have been volatile. They were rising since late last year after the market began pricing in supply losses following the closure of South32’s 500kt…