When the tide goes out, who is swimming naked? Goldman Sachs warns: Severe oversupply will cause prices of aluminum, lithium, and iron ore to plunge in 2026, with copper alone "standing out."

When the tide goes out, who is swimming naked? Goldman Sachs warns: Severe oversupply will cause prices of aluminum, lithium, and iron ore to plunge in 2026, with copper alone "standing out."

Since the beginning of this year, propelled by macroeconomic tailwinds such as expectations of Fed rate cuts, dollar depreciation, and improved growth prospects in China, industrial metal prices have generally surged. On Wednesday, copper prices even climbed to a record high of $11,540/ton.

According to the Chasing Wind trading desk, Goldman Sachs issued a warning in its report published on December 3rd: This wave driven by speculative sentiment is about to recede, and except for copper, the industrial metals market is about to face severe oversupply.

Copper (Bullish): Although the recent breakout above $11,000/ton is unsustainable, copper remains Goldman’s “top pick” among metals. Because of structural demand from power grids and AI infrastructure, copper prices have a solid bottom at $10,000/ton.Aluminum, Lithium, Iron Ore (Bearish): These three metals will fully enter a surplus cycle in 2026. Goldman predicts that by the end of 2026, the prices of aluminum, lithium, and iron ore will fall by 18%, 23%, and 17%, respectively, compared to spot prices.

Copper: The “Chosen One” with Constrained Supply and Strong Demand

Goldman is optimistic only about copper’s outlook, but also emphasizes that its price growth is not unlimited. The report believes that by 2026, copper prices will operate in the $10,000–$11,000 range.

The strength of the copper market mainly comes from two aspects:

Structural supply bottlenecks: The report notes that accidents at multiple major copper mines globally this year (such as Kamoa-Kakula and El Teniente) have highlighted the challenges of aging mines and complex geology. Limited mine supply growth provides solid bottom support for copper prices.Structural demand growth: Investments in strategic fields such as grid upgrades, power infrastructure, artificial intelligence, and defense are driving strong and sustained copper demand. Goldman expects that by 2030, grid and power facility investments alone will contribute more than 60% of copper demand growth.

Investors should note that Goldman has mentioned a short-term catalyst: The market expects that the US may impose at least 25% tariffs on refined copper by mid-2026. This has led traders to ship copper to the US ahead of time for stockpiling, tightening supply in markets outside the US. Based on this, Goldman has raised its average LME copper price forecast for the first half of 2026 from $10,415/ton to $10,710/ton.

Nevertheless, Goldman also reminds that the recent breach of $11,000 is mainly based on “expectation” for the future, rather than current fundamentals. The bank forecasts that the global copper market will see a surplus of 500,000 tons in 2025, shrinking to 160,000 tons by 2026; the market will only shift from surplus to balance, and there will not be a severe shortage in the short term.

Aluminum: The Biggest Loser After the Tide Recedes, Target Price as Low as $2,350

The aluminum market is facing a double whammy of both supply and demand. Goldman recommends shorting aluminum.

1. A supply tsunami is imminent: Current high prices are stimulating excessive new supply, especially from new capacities in Indonesia and India. Goldman expects the global aluminum market to shift from balanced this year to an oversupply of 1.1 million tons in 2026. China’s overseas investment projects will collectively unleash capacity in 2026.

2. Substitution risk on the demand side: As the copper-aluminum price ratio widens, some sectors are seeing “aluminum replacing copper,” but in automotive manufacturing, manufacturers are switching from aluminum to cheaper steel due to cost concerns. For example, US steel producer Cleveland-Cliffs has announced it will provide steel substitutes to customers affected by aluminum supply outages.

3. Price prediction: Based on the above factors, Goldman maintains its bearish stance, expecting LME aluminum prices to fall to $2,350/ton in Q4 2026.

Lithium: The Rebound Is Just a “Dead Cat Bounce,” Supply Floodgates About to Open

Although lithium prices have recently rebounded from five-year lows—even surpassing $11,000/ton (lithium carbonate)—this is only a short-term phenomenon.

1. Short-term shortage driven by energy storage demand: Goldman raised its short-term lithium price forecast, due to stronger than expected demand for energy storage systems (ESS) and the suspension of some Chinese lepidolite mines due to losses, reducing raw material supply.

2. Return to a steep decline in the second half of 2026: This shortage is unsustainable. With increased spodumene supply from Africa and Australia, plus the restart of previously closed Chinese lepidolite capacity, the market will loosen again in the second half of 2026. Goldman predicts that by end-2026, lithium prices will fall by 23% from spot levels, down to about $9,500/ton.

Iron Ore: Port Inventories Soar, Prices Will Fall Below $90

Iron ore fundamentals have deteriorated significantly in recent months, and the outlook for 2026 is even bleaker.

1. Facing both supply shocks and demand decline: Goldman expects China’s port iron ore inventories to surge by 51 million tons in 2026.Supply side: Increases not only from Australia and Brazil, but also from Guinea's Simandou project, which will supply 20 million tons of iron ore to the market next year.Demand side: It is estimated that global seaborne iron ore demand will decrease by 1% in 2026, with China’s steel output expected to decline by 2%.

2. Price forecast: To squeeze high-cost seaborne suppliers (such as India exports) out of the market, iron ore prices must fall. Goldman forecasts that SGX iron ore prices will drop to $88/ton by end-2026 (after Platts index specification adjustments, $86/ton).

Goldman’s report reveals a brutal reality: Many of the current industrial metal price increases are built on sand. For investors, the strategy for 2026 should be to “retain the authentic and discard the fake”—go long on copper, which has the logic of structural shortage, while firmly steering clear of or shorting aluminum, lithium, and iron ore, which will be faced with huge supply pressures.

 

~~~~~~~~~~~~~~~~~~~~~~~~

The above outstanding content comes from Chasing Wind Trading Desk.

For more detailed interpretation, including real-time analysis and frontline research, please join [Chasing Wind Trading Desk ▪ Annual Membership]

Risk Warning and DisclaimerThe market involves risks. Investments should be made with caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situations, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investments based on this article are at your own risk. ```