Aluminium Prices Set to Soar on China Cap, Green Energy Demand

Vandana Bharti, AVP - Commodities Research, SMC Global Securities, said, "China, which produces around 60% of global aluminium output, has reached its 45-million-tonne capacity ceiling, strictly limiting production growth."

The aluminium market is entering 2026 in a state of structural deficit, with prices hitting three-year highs above USD 3,000 per tonne on the LME as of early January, Vandana Bharti told ANI.

Prices have already climbed to multi-year highs, setting the tone for what is expected to be a volatile but firm market in the year ahead.

Bharti said aluminium is beginning 2026 in a state of structural deficit after a turbulent 2025 marked by sharp policy and supply shocks.

She added that last year's volatility was driven by factors such as steep US import tariffs and significant supply disruptions, while the key theme for 2026 is "tightened supply meeting resilient green demand."

Currently, aluminium is trading near USD 3,065 per tonne on the London Metal Exchange (LME), while prices on India's MCX are around Rs 306 per kg, according to analysts.

China, which accounts for about 60 per cent of global aluminium output, remains a central factor in the supply outlook.

Bharti noted that China has effectively reached its 45-million-tonne capacity ceiling, severely limiting scope for production growth.

At the same time, demand from EVs and renewable energy infrastructure is projected to rise sharply, with estimates pointing to a roughly 40 per cent increase by 2030.

While recycled aluminium and new smelting capacity in countries such as Indonesia are expanding, Bharti cautioned that these additions are unlikely to fully offset the impact of smelter shutdowns in Europe and persistent raw-material bottlenecks, particularly in Guinea.

Sharing a broadly optimistic view, Kaynat Chainwala, Research Analyst at Kotak Securities, said the positive outlook is not limited to aluminium alone.

"Overall, it is bullish for all metals," she said, reflecting bullish fundamentals across the complex.

From a technical perspective, Ravinder Kumar, Senior Research Analyst at SMC Global Securities, highlighted key price levels to watch in the near term. He said immediate support on the LME is seen near USD 2,750 per tonne, with resistance around USD 3,320 per tonne.

"Sustaining above USD 2,850 per tonne will keep the short-term trend positive, with momentum buying likely on dips," Kumar said. On MCX, he pegged resistance in the Rs 330-370 per kg zone and support near Rs 275 per kg.

For the full year, Kumar expects a wide trading range, with MCX aluminium seen between roughly Rs 200 and Rs 390 per kg, and LME prices between about USD 2,400 and USD 4,050 per tonne.

Looking further ahead, Amit Gupta, Senior Research Analyst at Kedia Advisory, said aluminium's role in light-weighting, decarbonisation and infrastructure development will keep demand strong into 2026.

"As a key material in the energy transition, aluminium's importance will continue to expand," Gupta said, adding that environmental regulations and the energy-intensive nature of production could cap supply growth.

Based on technical indicators, he sees a short-term target near USD 3,250 per tonne on the LME, while medium-to-long-term projections suggest prices could approach USD 4,000 per tonne in 2026 if bullish momentum is sustained, Gupta from Kedia Advisory said.

Aurobinda Gayan, CEO and Founder of Bluglance Consulting, expects aluminium prices to remain firm but range-bound in the near term.

He said LME three-month contracts are likely to trade in the USD 2,850-3,200 per tonne range over the next three to four months, with market direction driven more by inventory trends, macroeconomic signals and fund positioning than by a single dominant factor.

Overall, analysts agree that while volatility is inevitable, aluminium's structural fundamentals remain supportive, positioning the metal as a key beneficiary of the global push toward greener growth.

- ANI