Aluminum prices hit their highest level since April 2022, Goldman Sachs remains bearish.

According to Chasing Wind Trading Desk, Goldman Sachs adjusted its aluminum price forecast in a research report on January 27, raising the target price for the first half of 2026 to $3,150/ton. The report states that short-term price support mainly comes from the globally low inventory levels, uncertainty in power supply for new capacity in Indonesia, and continued demand from the new energy sector.

However, Goldman Sachs maintains a bearish outlook for aluminum prices in the medium to long term. The report points out that as new capacities in Indonesia, Saudi Arabia, and other regions come online, combined with potentially slowing global macroeconomic demand growth, the aluminum market is expected to shift to structural surplus in 2026. Based on this, the bank forecasts aluminum prices to fall back to $2,500/ton in the fourth quarter of 2026, and the average price for 2027 to further drop to $2,400/ton.

London aluminum futures continued their strong performance on Wednesday, once breaking above $3,300/ton to reach a new high since April 2022. Since mid-September 2025, London aluminum futures have risen about 27% from around $2,600.

Short-term Surge in Aluminum Prices: Three Major Drivers Supporting the Rally

Goldman Sachs's report points out that this round of price increases is mainly driven by the following three factors:

First, global aluminum inventories remain at low levels, with days of inventory coverage dropping from about 50 days in 2023 to 46 days in 2025. The low inventory directly supports the spot premium and strengthens bullish market expectations. Second, the market has doubts regarding the power supply capabilities of the new aluminum smelting capacity in Indonesia, and the actual commissioning of these capacities may lag expectations, further reinforcing expectations of tight supply. Finally, the rapid development of new energy sectors like electric vehicles and grid construction has significantly boosted terminal demand for aluminum, providing solid fundamental support for prices.

It is worth noting that the average aluminum price in January 2026 is expected to be around $3,130/ton, which, although not surpassing the record high during the European energy crisis in 2022, marks the second highest since that period.

Long-term Bearish Logic: Accelerated Supply Release + Slowing Demand Growth

Goldman Sachs points out, the current aluminum price rising above $3,000/ton reflects excessively optimistic pricing based on perceived scarcity, and the market has underestimated the systemic supply increase led by Indonesia; the medium- to long-term supply surplus trend is essentially established.

In terms of supply, Indonesia has become the core of global aluminum capacity expansion, with output expected to increase by 725,000 tons and 900,000 tons in 2026 and 2027 respectively, and total output reaching 4.25 million tons by 2030. Large projects represented by Adaro and Ju Wan have implemented supporting electricity facilities, with high production certainty. Meanwhile, regions like Saudi Arabia, Kazakhstan, and Angola, with smelting capacity investments led by Chinese capital, will gradually come online after 2027. China is also continuously increasing its output, with primary aluminum expected to reach 46.2 million tons in 2029, breaking the previous expected capacity upper limit of 45 million tons.

The demand side faces structural pressure. Aluminum demand in the photovoltaic sector is expected to decline year-on-year in 2026-2027, and the aluminum intensity per MW of solar modules is expected to drop from 7.3 tons/MW in 2025 to 5.1 tons/MW in 2030, which will further weaken demand support. Although the aluminum usage per electric vehicle is higher in the automotive sector, global growth forecasts for EV production and sales have been revised downward, resulting in actual aluminum demand being weaker than previously expected.

Based on these supply and demand changes, Goldman Sachs slightly revised down the surplus for the global aluminum market in 2026 to 80,000 tons, maintains a forecast of a 1.6 million ton surplus for 2027, and sharply raised the estimated surplus for 2028 to 2.3 million tons. As inventory levels gradually recover to those seen around 2018, aluminum prices will return to their cost and fundamental equilibrium levels in the medium to long term.

“China Shock 2.0”: Cost and Efficiency Reshaping the Global Supply Structure

Goldman Sachs analysis points out, Chinese aluminum smelting industry is driving structural changes in the global supply landscape through systematic output of technology and production models. Leveraging its significant advantages in cost control and engineering efficiency, Chinese enterprises have reduced the construction cost of electrolytic aluminum capacity by about 50% compared to 20 years ago, and shortened the construction cycle for “power plant-smelter” integrated projects from the 30 months commonly needed by international counterparts to 18 months, a 40% efficiency improvement.

This highly efficient expansion model is quickly being implemented in Southeast Asian countries such as Indonesia and Vietnam. Relying on a mature industrial chain and project execution capabilities, Chinese companies are promoting rapid deployment of low-cost capacity overseas. Goldman Sachs believes this trend will continue to depress the long-term equilibrium level of global aluminum prices, with its impact similar to the shock effect Chinese domestic capacity expansion brought to the global market between 2007 and 2025.

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The above content comes from Chasing Wind Trading Desk.

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