Goldman Sachs has maintained its bearish stance on aluminium over the medium term, citing a dual supply shock: near-term tightness from prolonged Middle East outages and a structural supply wave from Indonesia and China that will push the market back into surplus by 2027.
Middle East Outages to Persist Longer Than Expected
In a research report released on June 21, 2026, Goldman Sachs noted that Middle East supply losses will persist longer than initially assumed. Industry feedback and company announcements indicate a slower recovery in production. Even if the Strait of Hormuz reopens under an announced interim deal, smelters cannot immediately return to full capacity because damaged potlines need repairs and curtailed capacity must be restarted gradually.
The bank downgraded its Middle East output forecast by 660 kilotonnes (kt) for 2026 and 1 million tonnes (Mt) for 2027. It now assumes damaged capacity restarts in early 2027 rather than the second half of 2026. Goldman Sachs expects Bahrain output to return to pre-conflict levels by mid-2027 and the UAE by end-2027.
Market Balance Tightens in 2026, Shifts to Surplus in 2027
This near-term shock is tightening the market balance. Goldman Sachs now expects the global aluminium market to post a 720 kt deficit in 2026 and a 590 kt surplus in 2027, compared with its earlier forecasts of a 570 kt deficit and a 1.3 Mt surplus, respectively.
According to the report, this is a tale of two supply shocks: a near-term Middle East shock that tightens the 2026/2027 balance and supports near-term prices, set against a structural China-backed supply wave, led by Indonesia, that increasingly offsets the disruption over time and keeps the bank bearish further out.
Indonesia and China Drive Supply Offset
Goldman Sachs raised its Indonesian primary aluminium production forecast to 1.7 Mt in 2026 and 2.9 Mt in 2027, up from 1.6 Mt and 2.5 Mt previously. This revision reflects faster ramps at Adaro, Taijing Morowali, and Juwan Weda Bay. Indonesian output is already up around 89% year-on-year year-to-date.
For China, the bank raised its 2026 and 2027 production forecasts to 45.6 Mt and 46.3 Mt, respectively, as strong margins support restarts and overproduction above the 45 Mt capacity cap.
Price Forecasts and Risks
On prices, Goldman Sachs nudged its Q3 2026 and average 2027 LME aluminium forecasts higher to $3,300 per tonne and $2,950 per tonne, respectively, from $3,200 and $2,750 previously. However, these forecasts remain below forward prices of $3,400 and $3,250 per tonne.
The bank closed its short December 2026 LME aluminium trade and rolled to a short December 2027 position, where its forecast sits furthest below the forward and best expresses its structural surplus view.
Risks remain two-sided. A slower Middle East restart would keep 2027 fairly balanced around $3,250 per tonne, while a faster restart could lift the surplus toward 1.2 Mt and push prices closer to $2,750 per tonne.
