As base metals surge, Goldman Sachs takes a contrarian bearish view: copper demand is showing signs of weakness and aluminum is entering a surplus cycle.
```
The recent strong rally in the base metals market is facing a key moment for fundamental validation. Although the London Metal Exchange Index (LMEX), covering six major industrial metals, has risen by about 7% so far this year, Goldman Sachs has issued a warning: the current price performance has begun to diverge significantly from physical demand.
On January 28, Trina Chen, Co-Head of Goldman Sachs Equity Research, stated: “We’ve observed negative reactions on the actual production side, with demand beginning to fall.” The bank’s latest survey of the copper market shows that downstream customers, from consumer electronics to industrial hardware, are cutting back on purchases, resulting in a general decline in orders for processing companies. Of particular note is that orders for power grid construction, traditionally a key pillar of copper consumption, are also showing signs of slowing growth.
The current rise in metal prices is mainly driven by expectations of tightening supply, a weakening dollar, and expectations of U.S. Federal Reserve rate cuts. However, as signs of weakness on the demand side gradually appear, the gap between market optimism and the fundamentals of the real economy is drawing growing caution from analysts.
Goldman's latest report also points out that although it raised its aluminum price target for the first half of 2026 to $3,150/ton, it maintains a bearish view in the medium and long term, believing that as new capacity in Indonesia and other regions comes online, combined with slower growth in demand from sectors such as photovoltaics and automobiles, the global aluminum market is expected to enter a structural surplus in 2026.
Copper: Significant Divergence Between Price and Demand
Currently, copper prices have touched a high of $13,247 per ton, mainly supported by expectations of global supply shortages, a weaker dollar, and prospects of interest rate cuts by the Federal Reserve. However, Goldman Sachs indicated on January 28 that its latest market survey shows purchasing activities in downstream sectors, from consumer electronics to hardware manufacturing, have contracted significantly, leading to a 10% to 30% decline in orders for processors.
It is especially noteworthy that orders for power grid construction—a long-term stable pillar of industrial metal consumption—have begun to slow, which may signal that broader economic activity is cooling down. If this trend continues, it will present substantial pressure on the currently high metal prices.
Aluminum: Upward Short-Term Expectations and Bearish Long-term Structure
Aluminum prices have also recently hit their highest levels since April 2022. In its latest report, Goldman Sachs raised its aluminum price target for the first half of 2026 to $3,150/ton, acknowledging short-term support from low inventories and new energy demand, but clearly maintaining a bearish outlook for the medium and long term.
The core logic is: as new capacity in regions such as Indonesia is set to come online, and as demand growth in the photovoltaic sector (with decreasing aluminum consumption per unit) and the automotive sector (with expected slower growth in electric vehicle production and sales) will structurally slow, the global aluminum market is expected to enter a surplus cycle in 2026, with the average price possibly falling back to $2,400/ton in 2027. The report also warns that current aluminum prices have a significant scarcity premium risk built in.
Risk Warning and DisclaimerThe market carries risks; investment requires caution. This article does not constitute personal investment advice and does not take into account the special investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article suit their specific situation. Investments made accordingly are at the user's own risk.
```