Bernstein has retained its aluminium price projection for the second half of 2026 at $3,100 per ton, even as some supply-side fears have diminished following a ceasefire in the Strait of Hormuz and a quicker production rebound in the Middle East.
Prices for aluminium rallied sharply between March and May when the Strait of Hormuz situation threatened both metal exports and imports of raw materials. That episode pushed a risk premium into markets, much of which has since dissipated after the ceasefire and the gradual reopening of shipping lanes. Despite that unwinding, traders and physical market participants still face tighter-than-pre-crisis conditions for metal availability.
Supply dynamics improved faster than many had anticipated in the Middle East. Emirates Global Aluminium (EGA) reported that its Al Taweelah smelter - a facility with 1.6 million tons per annum capacity - is restarting ahead of schedule. The company indicated that a return to pre-crisis shipment levels is expected, based on current conditions, to require the re-opening of the Strait of Hormuz, while cautioning that a full recovery could take up to a year.
At the same time, China is expanding capacity, adding 740,000 tons per annum of new aluminium smelting this year and bringing its total output to approximately 45.3 million tons. Within China, export-oriented industrial sectors have shown resilience, whereas domestic demand has continued to soften, particularly in construction and real estate.
On demand more broadly, manufacturing activity has stabilized across Europe, Japan and the United States, according to the reporting, but underlying demand is described as far from robust. Those demand patterns, combined with ongoing supply adjustments, frame Bernstein's view of market balances.
Bernstein also highlighted that aluminium margins remain above long-term mid-cycle levels. The firm expects the market to remain in deficit through 2026, a condition it says should support prices above the $3,000 per ton mark this year before they gradually move back toward long-term mid-cycle levels.
Key points
- Bernstein keeps its 2H 2026 aluminium price target at $3,100 per ton, reflecting ongoing tightness in the physical market.
- Middle East production is returning faster than expected, with EGA's Al Taweelah (1.6 million tpa) restarting ahead of schedule, though full recovery may take up to a year and depends on the Strait re-opening.
- China is adding 740,000 tpa of smelting capacity this year, lifting total aluminium output to around 45.3 million tons, while domestic demand in construction and real estate weakens.
Risks and uncertainties
- The restoration of pre-crisis shipment levels depends on the re-opening of the Strait of Hormuz; if that is delayed, shipments could remain constrained - impacting metal availability and logistics.
- Full recovery of Middle East production could take up to a year, leaving a period of potential supply disruption and uncertainty for suppliers and buyers.
- Weakening domestic demand in China's construction and real estate sectors may weigh on consumption, creating uncertainty for global demand-side balances.