China-Indonesia Aluminum Capacity Surge Leads to Market Oversupply in 2027

Goldman Sachs commodities research report indicates that due to the shutdown of Middle East aluminum plants, short-term aluminum prices will remain high, but with significant expansion of new supply from Indonesia and China, the global aluminum market will return to oversupply in 2027, and the bank is bearish on aluminum prices in the medium to long term. The report revises expectations for Middle East capacity recovery, with local smelter restart progress slower than previously estimated. Even if the Strait of Hormuz resumes navigation under a temporary agreement, damaged electrolytic cells still need repair, and capacity can only be restarted in stages. Goldman Sachs cuts Middle East aluminum production by 660,000 tons in 2026 and 1 million tons in 2027; it predicts Bahrain's capacity will recover to pre-conflict levels by mid-2027, and the UAE by the end of 2027. Supply contraction results in a global aluminum deficit of 720,000 tons in 2026, compared to a previous forecast of only 570,000 tons; the market will turn to a surplus of 590,000 tons in 2027, versus a previous estimate of 1.3 million tons. The report summarizes the market situation as a dual supply shock: Middle East production cuts tighten supply in the short term and support aluminum prices, but new capacity led by Indonesia and China will gradually offset the gap, determining the medium- to long-term oversupply pattern. Goldman Sachs raises its forecast for Indonesian primary aluminum production to 1.7 million tons in 2026 and 2.9 million tons in 2027, citing accelerated commissioning of the Adaro, Tsingshan Morowali, and Zhuwan Weda Bay projects, with Indonesia's aluminum output already surging 89% year-on-year.

Goldman Sachs Commodities Research Report indicates that due to the shutdown of Middle East aluminum plants, short-term aluminum prices will remain high, but with significant expansion of new supply from Indonesia and China, the global aluminum market will return to oversupply in 2027, and the bank is bearish on aluminum prices in the medium to long term. The report revises expectations for Middle East capacity recovery, with local smelters' restart progress slower than previously estimated. Even if the Strait of Hormuz resumes navigation under a temporary agreement, damaged electrolytic cells still need repair, and capacity can only be restarted in stages. Goldman Sachs cuts Middle East aluminum production by 660,000 tons in 2026 and 1 million tons in 2027; it predicts Bahrain's capacity will recover to pre-conflict levels by mid-2027, and the UAE by the end of 2027. Supply contraction results in a global aluminum deficit of 720,000 tons in 2026, compared to a previous forecast of only 570,000 tons; the market will turn to a surplus of 590,000 tons in 2027, versus a previous estimate of 1.3 million tons. The report summarizes the market situation as a dual supply shock: Middle East production cuts tighten supply in the short term and support aluminum prices, but new capacity led by Indonesia and China will gradually offset the gap, determining the medium- to long-term oversupply pattern. Goldman Sachs raises its forecast for Indonesian primary aluminum production to 1.7 million tons in 2026 and 2.9 million tons in 2027, citing accelerated commissioning of the Adaro, Tsingshan Morowali, and Zhuwan Weda Bay projects, with Indonesia's aluminum output already surging 89% year-on-year.

At the same time, Goldman Sachs raises China's production forecast to 45.6 million tons in 2026 and 46.3 million tons in 2027, with high profits stimulating capacity restarts, and actual output exceeding the 4.5 million ton capacity cap. In terms of prices, Goldman Sachs raises its London Metal Exchange aluminum price forecast to $3,300/ton in Q3 2026 and $2,950/ton average in 2027, still below forward curve levels of $3,400 and $3,250/ton. The bank closed its short position on December 2026 aluminum and switched to a short position on December 2027, where the gap between forecast and forward price is largest, aligning with the medium- to long-term oversupply view. There are two-way risks: if Middle East restart is delayed, 2027 aluminum prices may stay around $3,250/ton; if restart accelerates, the annual surplus could expand to 1.2 million tons, with prices falling to $2,750/ton.