Easing aluminium supply risk prompts lower forecasts
The current dynamics of aluminium supply have shifted significantly, as operational progress from Emirates Global Aluminium (EGA) has improved market expectations, prompting a downward revision in aluminium price forecasts. Per the full note from ING, despite ongoing geopolitical tensions in the Middle East, aluminium prices have fallen from recent highs due to optimistic supply outlooks, particularly the reactivation of EGA's Al Taweelah operations. This market sentiment exhibits a potential return to equilibrium, which could influence broader commodity and currency positioning strategies. While prices climbed initially amid Middle East tensions, they have since receded as recovery signals from key producers have strengthened, indicating a less intensive disruption than previously anticipated.
What the desk is arguing
The thesis suggests that easing aluminium supply risks, stemming from operational recoveries at EGA's facilities, are driving current market adjustments in price forecasts. According to the commentary, the company has restarted production and is aiming for a quick return to full capacity, which lessens concern over supply disruptions.
Data from EGA indicates a rebound in production capabilities at Al Taweelah, with approximately 7% of pots already active and alumina output expected to hit 50% shortly. These developments have directly impacted short-term market sentiment, demonstrating a shift from panic pricing based on geopolitical uncertainties to more grounded evaluations.
Where it sits in our coverage
Current consensus forecasts suggest a target aluminium price of 1.075, with potential range limits set at 1.04 and 1.12. Relevant institutions have published their targets as follows: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This perspective aligns closely with jpmorgan, sitting near the upper bound of consensus, while bofa presents a more cautious outlook, indicating a significant divergence in anticipated price action over the coming months.
How other firms see it
Market sentiment is grouped, with firms like jpmorgan expressing a bullish stance on aluminium prices, while bofa opts for a bearish view. This contrast is pivotal as traders reassess supply-side risks against a backdrop of fluctuating geopolitical tension.
Attention should be directed to correlated markets such as the USD/CAD and AUD/USD, as movements in aluminium prices could influence resource-linked currencies, showcasing broader implications for FX flows and positioning.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Aluminium prices retreat from highs amid improving supply conditions.
- 02EGA's operational updates signal a faster recovery in aluminium production.
- 03Geopolitical risks remain, but are outweighed by supply outlook improvements.
- 04Market sentiment is shifting back towards supply normalization.
Market implications
Watch the price level around 1.075 as a pivot point for aluminium, given its consensus target position. Movements towards 1.04 could suggest a substantial recalibration of market expectations, which may impact related currency pairs. Traders should be alert to shifts in positioning amid ongoing geopolitical developments.
Risks to this view
Risks to this outlook include any escalation in Middle Eastern geopolitical tensions that could lead to unexpected supply disruptions or operational setbacks at key production facilities such as EGA. Additionally, a sudden downturn in demand from major consumers could significantly alter the current bullish sentiment in the aluminium market.
Articles Easing aluminium supply risk prompts lower forecasts Published 14:23 Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Aluminium prices have retreated from their recent highs despite renewed tensions in the Middle East. While geopolitical risks remain elevated, recent operational updates and improving supply expectations have prompted the market to reassess the likelihood of a prolonged disruption to aluminium supply Ewa Manthey The most notable change since our previous forecast has been the improving outlook for Middle Eastern aluminium production Supply risks are easing This week’s price action illustrates how market expectations have shifted. Renewed tensions in the Middle East initially supported aluminium prices.
However, prices moved lower after Emirates Global Aluminium (EGA) announced further progress in restoring operations at its Al Taweelah complex, reinforcing expectations that supply disruptions are likely to prove less severe than previously feared. This shift in market expectations is reflected in our revised supply assumptions. Middle East rally unwinds Source: LME, ING Research "> Source: LME, ING Research Middle East recovery gathers pace The biggest change since our previous forecast has been the improving outlook for Middle Eastern aluminium production.
Recent operational updates from EGA have consistently pointed to a faster-than-expected recovery. The company has already restarted aluminium production at its Al Taweelah smelter, with around 7% of pots back online, and has since indicated that it is accelerating the restart process. In its latest update, EGA said alumina production at the Al Taweelah refinery is expected to reach 50% of capacity within days and return to full production by the end of the year.
Importantly, EGA has also indicated that the restart of aluminium production at the adjacent smelter does not depend on the refinery reaching full output, suggesting the recovery in aluminium production could proceed more smoothly than previously assumed. We also now expect a gradual improvement in operating rates at Alba and Qatalum through the second half of the year as regional conditions continue to stabilise. Together, these changes add around 0.3Mt of aluminium production during the second half of 2026 relative to our previous assumptions.
China boosts exports China has also played a role in easing supply concerns. Chinese aluminium exports surged in May, climbing 16% year-on-year to 630kt (China Customs), improving physical availability outside China and helping alleviate some of the tightness in overseas markets. At the same time, Chinese primary aluminium production continued to rise, with May output reaching a record 3.89 Mt (NBS), taking annualised production slightly above the country’s 45Mt capacity cap.
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