According to Citigroup, the price of aluminum is heading towards a new all-time high as production losses in the Middle East are massively reducing global supply.
• Aluminum on the way to a new all-time high?
• Middle East conflict restricts supply
• Risk limited to the bottom?
According to Citigroup, the aluminum market is on the verge of a historic increase. The major US bank currently sees the most promising market environment for the light metal in more than five decades. Driven by structural shifts on the supply and demand sides, the commodity could enter a prolonged phase of extreme scarcity, driving the price to new record highs.
Price target of $4,000: The path to a new record high
In their current analysis, commodity experts at Citigroup predict that the price of aluminum on the London Metal Exchange (LME) could rise to as much as $4,000 per ton in the next 12 to 15 months, according to MarketWatch. Such a price level would set the previous historical high from 2022 of around $3,850 per ton. The analysts emphasize that this is not a short-term speculator bubble, but rather the strongest fundamental situation since the 1970s. For investors and the manufacturing industry alike, this forecast signals a fundamental revaluation of the metal.
Bottlenecks in supply: When production reaches its limits
As demand continues to rise, global supply is struggling to keep up. Citigroup points to significant capacity limits at global smelters. Citi expects a global supply deficit of around 2.7 million tonnes for 2026, even assuming weak demand conditions. As the war in Iran escalates, several aluminum smelters in the Middle East have had to stop or reduce production. “Following the turmoil in the Middle East, supply elasticities across the system have fallen as China remains under pressure and supply growth outside China is insufficient to offset existing deficits.”
These persistent deficits will inevitably have to be offset by destocking, which analysts say is the key question for the market at the moment. At the beginning of such a shortage cycle, hidden stocks in retail and supply chains can cushion the bottleneck – which means that price developments are initially “volatile, frustrating and due to macroeconomic factors” instead of exploding immediately. However, as soon as these buffers shrink and short hedges are dissolved, the risk increases dramatically: under these conditions, even minimal supply bottlenecks can trigger extreme, non-linear price jumps.
At the same time, the downside risk is very limited – unless there is a severe global recession of historic proportions like in the early 1980s or during the 2008 financial crisis.
Aluminum is also a key component for global decarbonization. The rapid expansion of solar systems, the modernization of power grids and the production of electric vehicles are consuming ever larger quantities of the metal. There is also a new, extremely dynamic demand factor: the global boom in data centers for artificial intelligence (AI). These modern infrastructures require gigantic amounts of aluminum for busbars, cooling systems and housing components, which disrupts traditional demand models.
Evelyn Schmal, editorial team at finanzen.net