Positive Outlook on Aluminum Prices#
Morgan Stanley has a favorable view on aluminum prices, attributing this to increasing smelter shutdowns in the Middle East. These shutdowns are occurring alongside ongoing shipping disruptions through the Strait of Hormuz, a crucial waterway for global trade.
Supply Constraints Intensify#
The report highlights that approximately 564,000 tonnes of aluminum production per year, which accounts for 0.8% of global capacity, is being shut down in the Middle East. This situation is exacerbated by a recent shutdown of a 500,000 tonne per year smelter in Mozambique. The Middle East is responsible for 9% of the world's aluminum production but is heavily dependent on imports for raw materials, producing only 3% of alumina and 1.3% of bauxite.
Raw Material Availability Issues#
The availability of raw materials is becoming a significant concern for smelters in the region. To produce one tonne of aluminum, smelters need two tonnes of bauxite, and to create one tonne of alumina, they require two tonnes of bauxite. Reports indicate that Bahrain’s Alba is experiencing very low stocks of aluminum raw materials, while Emirates Global Aluminium has only a two-to-three week supply buffer.
Market Dynamics and Price Predictions#
Morgan Stanley has set a bullish price target of $3,700 per tonne for aluminum by fiscal year 2026. Factors contributing to this outlook include limited supply from China, reduced power availability affecting production in Indonesia, and challenges in expanding aluminum production in other regions. The aluminum market is currently experiencing tightness, as indicated by a steep backwardation in the aluminum forward curve and the lowest inventory levels on the London Metal Exchange since May 2025. Additionally, regional premiums are rising, with prices in Japan, Europe, and the United States increasing more than the benchmark set by the LME.