Market Data 
Investing.com — supply is expected to remain constrained over the medium term, according to analysts at BofA Securities.
The primary driver of this tight supply is China’s self-imposed production cap of 45 million tonnes annually.
Despite being the world’s largest producer, responsible for about 60% of global output, China’s production ceiling means the country has limited capacity to expand further.
This cap, combined with China’s disciplined adherence to it, suggests that aluminium markets will likely remain in a deficit, keeping supplies tight into the foreseeable future.
The global aluminium market is also hindered by the slow pace of new supply additions. BofA analysts project that global supply additions from 2023 to 2026 will grow modestly, with a CAGR of 2.1%.
This sluggish growth, combined with a predicted increase in demand of over 4% annually in the coming years, reinforces the likelihood of a persistent supply deficit.
While countries like China are expanding aluminium production capacity abroad, such as in Indonesia, these projects are unlikely to offset the production limits within China itself.
Higher aluminium prices are anticipated as a result of this tight supply, with BofA forecasting a potential increase to $3,250 per tonne by 2026.
This price outlook is supported by China’s limited ability to ramp up production domestically and the slow development of new smelting projects globally.
Western aluminium producers, such as Alcoa (NYSE:) and Norsk Hydro (OTC:), are not expected to invest in new capacity due to high capital costs and environmental considerations, including the shift towards greener technologies.
Despite the forecasted price increases, the aluminium market’s response to these higher prices will likely be slow. New smelting projects remain scarce, particularly in Western countries, where returns on investment in smelting assets have been low in recent years.
This contrasts with the upstream segments of the aluminium value chain, such as bauxite mining and alumina refining, which have attracted higher levels of investment, particularly outside of China.
