For over two decades, the global aluminium market has been defined by one word: surplus. But that era is drawing to a close. According to analysts at Citi, the world is “sleepwalking into the biggest deficits in 20 years.” Their forecast points not only to a physical shortage, but to a long-term price shift—with aluminium needing to remain above $3,000 per metric ton to meet global demand, up from the current $2,700.
China Hits the Ceiling
The single largest driver of this turning point is China. Since 2002, the country’s primary aluminium output has surged from 4 million to 43 million tons, making it responsible for 60% of global production. In parallel, it has become the largest consumer and exporter of semi-finished aluminium products, with exports reaching a record 6.7 million tons in 2023.
However, Beijing’s strict cap of 45 million tons per year on aluminium smelting is halting that growth. August 2025 output hit 44.5 million tons, leaving almost no room for expansion. While some minor increases are technically feasible via operational adjustments like amperage boosts, the structural ceiling is now a reality.
At the same time, exports of aluminium products have already fallen 9% year-on-year in the first seven months of 2025, while imports of primary aluminium rose by 11% to 1.5 million tons—driven largely by a surge in shipments from Russia.
Shrinking Inventories and Sanctions
Global inventory levels are another red flag. LME aluminium stocks, including both registered and off-warrant, have fallen from over three million tons four years ago to just above 700,000 tons as of this month. Last year alone, the drop was over 30%. In theory, the market has seen recent inflows, but nearly all “new” arrivals were simply shifted from hidden off-warrant inventories.
Sanctions against Russian aluminium are further complicating this picture. Metal produced in Russia after April 2024 can no longer be delivered to the LME, pushing more Russian exports toward China and reducing the physical liquidity in the exchange. Nearly 100,000 tons were recently cancelled from LME stocks, a sign that traders are quietly moving metal out of the public eye.
Production Outside China Falters
Outside China, the story is even more fragile. Aluminium smelting has been in long-term decline, exacerbated by China’s overproduction and the energy-intensive nature of the metal. In the U.S., the Biden administration’s tariff increase to 50% may prompt some restarts, but in other regions, energy costs are forcing difficult decisions.
South32’s smelter in Mozambique is on the brink of closure unless a viable power deal is reached by late 2026. The harsh economics of smelting are driving global capacity downward, not up.
Will Indonesia Deliver?
All eyes are now on Indonesia, where Chinese firms are investing in smelting as a workaround to Beijing’s cap. The pipeline on paper is bold—up to 7 million tons of new capacity by 2030. Yet Citi is skeptical: it forecasts only 2.3 million tons will actually materialize due to energy shortages and low pricing discouraging investment in power infrastructure.
Many of these projects require either grid access—where competition from other sectors is fierce—or expensive private power plants. With current market conditions, the latter looks economically unviable.
Demand is Growing—Fast
Aluminium’s demand profile is also shifting. The energy transition is fuelling consumption, with sectors like solar, electric vehicles, and energy storage increasingly reliant on the lightweight metal. This evolving demand landscape means that even modest disruptions on the supply side can trigger major volatility.
For decades, aluminium’s biggest crises were caused by too much metal—floods of post-Soviet production in the 1990s or China’s vast output throughout the 2000s. But now, a very different kind of crisis is taking shape—one defined by too little metal and too few new sources of supply.
The coming five years may be defined not by surplus, but by scarcity—and a structurally higher cost of aluminium in global markets.