The World Bank has predicted that aluminum prices will rise by 21.6% this year compared to 2025, based on factors such as tight supply, low inventories and strong demand from emerging industries. However, the market price has exceeded this forecast level for almost two consecutive months. The World Bank pointed out in its Commodity Market Outlook report released on April 28 that aluminum prices may rise from an average of $3,200/ton from $2,632/ton last year, and then fall back to $3,000/ton in 2027.
Fadwa Aouini, a metals and mining analyst at AlphaMena, an equity research firm focused on the Middle East and North Africa region, said the forecast of $3,200 per ton seems somewhat conservative in the current context. "The London Metal Exchange (LME) spot price is already above that level, coupled with visible tight inventories, continued market differentiation, and persistent geopolitical risks, which suggest that the average price may be higher this year," he said. "While I still expect some volatility and possible weakness in prices if the macro environment deteriorates, the current risk balance points to a higher average price range, possibly between $3,300-3,600/t."
It has been nearly two months since aluminum prices broke through the World Bank's 2026 forecast. LME three-month aluminum prices broke above $3,200 per ton on March 2 and have remained above this level ever since.
The World Bank said that given the uncertain export outlook for the Middle East, which accounts for 7% of maritime aluminum trade, the risks to its outlook tend to the upside – as unexpectedly severe or prolonged supply disruptions and the adoption of artificial intelligence (AI) is faster than expected, which could drive demand and prices of base metals, including aluminum, to exceed benchmark forecasts.
Inventory levels are low
At the same time, primary aluminum inventories are also low: LME aluminum registered warehouse receipts have dropped to 270,000 tons at the end of March; Since then, it has rebounded to 335,000 tonnes on April 27, but even so, based on the current global daily production of 203,290 tonnes per day, the inventory is equivalent to about 1.5 days' production. "The decline in inventories in the first quarter is seasonal, usually occurring in April-May," Aouini said, adding that blocked exports from GCC countries "may delay this normalization process."
The analyst pointed out that the sharp decline in LME registered warehouse receipt inventories from the level of 420,000 tons in February was mainly driven by higher physical aluminum premiums and the flow of arbitrage funds to stronger regional markets, rather than only due to tensions in the Middle East. He noted that the historical normal level of LME aluminium registered warehouse receipt inventory is around 800,000 to 1.2 million tons, but now a more realistic equilibrium level should be in the range of 300,000 to 600,000 tons, adding that supply from late March to April should be seen as tight rather than extreme shortage.
"Indian aluminum seems to have been quickly digested due to its higher market acceptance," Aouini said. "At present, LME inventory is mainly dominated by RUSAL provided by Rusal. This reflects sanctions from Western buyers, resulting in Russian aluminum becoming a slow-moving inventory, likely concentrated in Asian warehouses and only available at discounted prices. ”
As a result, the market is fragmented: non-Russian metals are tight and Russian supplies are looser. "This does not mean that the market is imbalanced, but it does indicate that the current balance is more fragile and that nominal inventories overestimate real availability," the AlphaMena analyst noted, adding: "LME inventories are no longer fully representative of global supply given the increasing share of inventory without receipts and privately held inventories."
Anoop M. Fernandes, an analyst at SICO Bank, pointed out that the growth of Russian inventories is largely due to the backlog of previous years; Nearly 60% of them belong to category 1 warehouse receipts, a specific classification for Russian metals produced before the pre-sanctions deadline.
"The key to whether Russian metal can enter LME warehouses is the date of production of the metal," said an LME spokesperson. "If it is produced after April 13, 2024, it will not be possible to process a warehouse receipt at the LME. If it is before that date, then yes. ”
Fernandes said that since no one knows when the Strait of Hormuz will reopen, European and American producers may choose to stop imposing sanctions on Russian aluminum. The analyst also noted that while OTC inventory may be more or less — there is no public data yet — exchange inventory is indeed a concern.
"[Inventory] is close to the level of the 90s, but since then, global demand for primary aluminum has grown significantly," Fernandes noted, stressing that even the large physical scale of SHFE aluminum inventory is not significant in terms of the number of days consumed.
Supply and demand are tightly balanced
According to the World Bank and analysts, the primary aluminum market appears to be in a tight balance between supply and demand, although this is driven more by logistical constraints than absolute shortages.
The World Bank expects global aluminum supply growth to slow down in 2026-2027.
The World Bank believes that the contribution of recycled aluminum to global supply will be even more significant. The bank pointed out that some parts of Asia (outside China) have built a certain scale of primary aluminum smelting capacity due to lower electricity costs, but production in Europe is still far below the level of 2021. European aluminum was first hit by the Russia-Ukraine conflict, which led to soaring electricity costs, which in turn caused smelter shutdowns. According to the World Bank, rising energy prices triggered by the conflict in the Middle East are further exacerbating these cost pressures.
The agency believes that demand for aluminum will grow steadily, supported by the expansion of electrification technologies, including solar installations, wind turbines, transmission infrastructure and energy storage, as well as continued demand from the transportation and packaging industries. However, with interest rates still high, residential construction in several advanced economies has decreased, and aluminum demand in the construction industry remains weak.
