Aluminium Market Enters H2 2026 With Diverging Price, Supply and Demand Signals

The aluminium market faces a complex outlook for the second half of 2026 as prices, supply constraints, and uneven demand create competing pressures on market direction.

The aluminium market is heading into the second half of 2026 with prices, supply and demand moving in different directions. The market faces uncertainties on account of production disruptions and elevated costs. Also, traditional manufacturing demand remains uneven.

LME aluminium prices climbed sharply in early June, with spot prices touching $3,855 per tonne and the three-month contract touching $3,800. Prices later dropped 20% to around $3,100-$3,200 following the West Asia ceasefire. Meanwhile, analysts expect the market to face a supply shortfall of at least 2 million tonnes this year.

Why Prices Moved

The sharp price spike in early June reflected acute supply concerns tied to production disruptions in the Gulf region. The subsequent 20% pullback followed de-escalation signals from West Asia, which eased immediate supply fears but did not resolve underlying structural tightness.

Despite the recent price weakness, the market is expected to remain tight, with aluminium prices unlikely to fall below $3,000 per tonne during the rest of 2026. Elevated production costs and persistent supply constraints continue to underpin the price floor.

What the Supply Data Showed

Production losses in the Gulf remain a major concern. Output from the region fell 20% year on year to 2.4 million tonnes in H1. Restarting closed capacity could take more than a year. China, meanwhile, has reached its 45 million-tonne production ceiling.

These constraints mean that even with the recent price pullback, the structural supply deficit is expected to persist through the remainder of the year, supporting the $3,000 per tonne price floor cited by analysts.

Regional Demand Outlook

Demand prospects are stronger in North America and Europe, while Asian consumption remains moderate. India is emerging as a growth market. Domestic aluminium consumption is projected to witness a rise from 4.9 million tonnes in FY2025 to 8.5 million tonnes by FY2030. Also, primary capacity is projected to increase to 6.2 million tonnes.

This divergence in regional demand patterns adds another layer of complexity to the market outlook, with North American and European buyers facing tighter supply conditions while Asian markets show more moderate consumption trends outside of India's rapid growth trajectory.

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Courtesy: Scrap Monster