World Bank’s 21.6% aluminum price growth forecast is being eclipsed

The World Bank projected aluminum prices to increase by 21.6% this year compared with 2025, with the forecast underpinned by tight supply and inventories, alongside firm demand from emerging industries. The market price, however, has been exceeding that projection for almost two months now.

Aluminum could average at $3,200/metric ton, up from last year's $2,632/mt, and then potentially cool to $3,000/mt in 2027, the bank says in its Commodity Markets Outlook report published April 28.

The $3,200/mt forecast appears somewhat conservative in the current context, according to Fadwa Aouini, metals and mining analyst at Middle East North Africa-focused equity research company AlphaMena.

"Spot LME prices are already above that level, and the combination of tight visible inventories, ongoing market segmentation and persistent geopolitical risks suggests that the average price for the year is likely to come in higher," he told Platts. "While I would still expect some volatility and potential softening if macro conditions weaken, the balance of risks currently points to a higher average range, likely in the $3,300-$3,600/mt area."

It will soon be two months since the aluminum price exceeded the World Bank's 2026 projection. The LME 3-month price reached $3,200/mt on or shortly after March 2 and has since remained above that level, closing at 3,538/mt on April 28.

The World Bank itself concedes that, given uncertain prospects for exports from the Middle East, the region responsible for 7% of seaborne aluminum trade, risks to its outlook are tilted to the upside, as unexpectedly severe or lasting supply disruptions, and faster than anticipated AI adoption could push demand and prices of base metals, including aluminum, above baseline projections.

Low in absolute terms

Primary aluminum inventory also looks lowish in the meantime: LME's dwindled to 270,000 mt at the end of March; it has since recovered to 335,000 mt April 27, but even then represents just over 1.5 days of global primary aluminum production at its current levels of 203,290 mt/day.

"The Q1 drawdown pattern is seasonal and is typically followed by replenishment in April-May," Aouini said, adding that disruption to Gulf Cooperation Council nation exports "could delay this normalization."

This time, the LME inventory's sharp drawdown, from a 420,000 mt level in February, was mainly driven by elevated physical aluminum premiums and arbitrage flows into stronger regional markets rather than solely by Middle East tensions, the analyst said.

He noted that historical norms for LME aluminum inventory were around 0.8 million-1.2 million mt, but today a more realistic equilibrium is in the 300,000-600,000 mt range, adding that the late March to April availability should be considered tight rather than critically low.

The other issue with the LME stock is its unvaried composition. At the end of March, Russian metal accounted for 92% of the total amount available in LME-registered warehouses, while stocks of Indian aluminum, the second-largest origin category previously, had almost entirely been depleted, according to LME stock data.

"Indian-origin metal appears to have been readily absorbed due to better market acceptance," Aouini said. "Russian material, largely from Rusal, now dominates LME stocks. This reflects self-sanctioning by Western buyers, leaving Russian units as 'sticky' inventory, likely concentrated in Asian warehouses and only moving at a discount."

As a result, the market is becoming more segmented: tight for non-Russian metal, but looser for Russian supply.

"This does not imply a market imbalance, but it does point to a more fragile equilibrium where headline stocks overstate effective availability," the AlphaMena analyst said, with the caveat that "LME stocks are no longer fully representative of global availability, given the growing share of off-warrant and privately held inventories."

A lot of the Russian stock build is from prior years; nearly 60% of it is of Type-1 warrant, a specific classification for Russian metal produced before the pre-sanctions cutoff date, according to Anoop M. Fernandes, analyst at SICO Bank.

"In respect to whether Russian metal can enter LME warehouses, the key thing is the date when the metal was made," an LME spokesperson said. "If it was produced after 13 April 2024, then it cannot be placed on warrant with the LME."

If before that date, "then it can."

Fernandes said that, as no one knows when the Strait of Hormuz will reopen, US and European producers might opt to flip from self-sanctioning Russian aluminum. The analyst also observed that while off-exchange inventories could be significant or not -- there is no publicly available data on them -- exchange inventories are indeed not comfortable.

"[They are] close to levels seen in the nineties, but global primary aluminum demand has grown massively since then," Fernandes said, noting that even SHFE aluminum stock, big in physical volumes, in terms of days of consumption, is not so significant.

Tightly balanced

The primary aluminum market appears to be in tight balance, even if that is driven more by logistical constraints than outright scarcity, according to both the World Bank and the analysts.

The former expects global aluminum supply growth to moderate in 2026-27 as production in China, last year at just over 44 million mt, was nearing the country's self-imposed 45 million mt/year output cap.

Partially offsetting that slowdown in China, the bank sees recycled aluminum's contribution to global supply as more meaningful and points to new primary smelter capacity developed in parts of Asia outside China with lower power costs, but production in Europe remains well below 2021 levels. It was first undermined by Russia's invasion of Ukraine, triggering a surge in power costs and resulting in smelter closures. The same cost pressures are now reinforced by energy price hikes linked to the Middle East conflict, according to the World Bank.

The institution sees demand for aluminum as steadily growing, supported by the expansion of electrification technologies, including solar installations, wind turbines, power transmission infrastructure and energy storage, alongside continued demand from transport and packaging. Offtake from construction remains weak, though, due to the prolonged downturn in China's property sector and weak residential construction in several advanced economies amid still-elevated interest rates.