Aluminum Prices Rally Amid Tight Supply Despite Signs of Easing Shortages

Aluminum prices have staged a notable rally in early September 2026, reaching a three-week high of $3,328.50 per metric ton on the London Metal Exchange (LME) on September 3. This marks the fifth consecutive session of gains, with prices trading around $3,310 on September 7, up 0.54% from the previous day. The surge comes amid a backdrop of record-low aluminum inventories and a softer U.S. dollar, factors that have tightened the physical market and boosted demand from international buyers.

Record-Low Inventories Tighten Supply

The physical aluminum market is feeling the squeeze as LME warehouse stocks hit their lowest since 1990, standing at just 245,975 tons on September 3. This scarcity is echoed in China, where inventories on the Shanghai Futures Exchange have declined for 11 straight weeks, falling from a six-year peak in mid-June to 391,498 tons. Such sustained inventory draws signal strong consumption or constrained supply, reinforcing upward pressure on prices.

ING commodities strategist Ewa Manthey highlighted this dynamic, noting that "Aluminium is supported by physical market tightness and expectations of firmer seasonal demand in China." The seasonal uptick in Chinese industrial activity typically drives demand for aluminum, used extensively in construction, automotive, and packaging sectors.

The Dollar's Role and Global Demand

The rally is also underpinned by a softer U.S. dollar, which has lost ground as expectations for further Federal Reserve interest rate hikes have faded. Since aluminum is priced in dollars, a weaker greenback makes the metal cheaper for holders of other currencies, stimulating international buying. This effect has lifted related base metals as well, with copper gaining 0.8% on September 3.

The interplay between currency movements and commodity prices remains a critical factor for market participants, especially amid ongoing global economic uncertainties. For aluminum consumers, a weaker dollar can mean more affordable imports, while producers may benefit from higher dollar prices if they sell into international markets.

Signs of Easing Supply Constraints

Despite the recent price strength, several developments suggest that the aluminum supply shortage may be easing. Wood Mackenzie revised its 2026 global aluminum deficit estimate down to around 900,000 metric tons in early August, a significant improvement from earlier projections of 2.5 to 3 million tons. This revision reflects increased output and shifting trade flows.

Emirates Global Aluminium (EGA) has been ramping up production at its Al Taweelah smelter in the UAE, restarting 18% of its reduction cells by mid-August. This restoration of capacity adds meaningful supply to the market and could temper price gains if the trend continues.

Meanwhile, Chinese aluminum exports surged by 18.7% year-on-year in July, further easing global shortages. This export growth reflects China's strategic stock management and its role as a major aluminum producer and consumer. Notably, the DATA CONTEXT shows aluminum's monthly price as of July 1, 2026 stood at $3,158.27 per ton, representing a monthly decline of approximately 8.16% — a reminder that the early-September rally has recovered against a still-subdued medium-term price trend.

Policy and Regulatory Developments Impacting Trade

On the regulatory front, the European Union has taken a cautious approach to aluminum scrap exports. On September 4, 2026, an EU industry chief abandoned proposals to impose trade measures restricting aluminum scrap exports. Instead, the EU is preparing a delegated act to ban exports of waste, including aluminum scrap, aiming to tighten control over raw material flows within the bloc.

This move aligns with the EU's Carbon Border Adjustment Mechanism (CBAM), which will require declarations and certificate surrenders for 2026 imports by September 30, 2027. CBAM is expected to influence sourcing decisions and cost structures for aluminum producers and consumers in Europe, potentially reshaping trade patterns.

Goldman Sachs Bearish Forecast: A Longer-Term Caution

Not everyone is bullish on aluminum's near-term strength. Goldman Sachs, in a forecast published on October 6, 2025, projected a market surplus in 2026/2027 and anticipated LME prices to decline to $2,350 a ton in the fourth quarter of 2026. If realized, that would represent a sharp reversal from current levels above $3,300. The bank's outlook underscores that while physical tightness has supported prices in the short term, the combination of rising production, surging Chinese exports, and weakening deficit estimates may ultimately weigh on the market.

This bearish scenario serves as an important counterweight for traders and consumers who are hedging or locking in procurement contracts. The gap between the Goldman Sachs $2,350 target and the current $3,310 trading level highlights the degree of uncertainty in the market.

What This Means for Market Participants

The current aluminum price rally benefits producers who can capitalize on tight supply and strong demand, especially those with low-cost production or access to scarce inventories. Conversely, consumers such as automakers, packaging companies, and construction firms face higher input costs, which could translate into increased prices for end products.

The easing supply signals — including production restarts and export growth — suggest that the market may gradually rebalance. However, the timeline and scale of this adjustment remain uncertain, especially with seasonal demand in China and evolving trade policies adding complexity.

Investors and traders should monitor LME and Shanghai inventory levels closely, as well as developments in U.S. monetary policy and EU regulatory actions. These factors will shape aluminum's price trajectory in the coming months. For broader context on how metals and commodities move together, our Market Today section offers continuous coverage.

Aluminum Market Snapshot

Note: Monthly price data as of July 1, 2026. Spot price on September 7, 2026 was approximately $3,310 per metric ton.

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FAQ

Why have aluminum prices risen recently despite the sharp monthly decline?

Aluminum's monthly data through July 1 shows a decline of around 8.2%, but prices rebounded sharply in early September 2026. The recovery was driven by historically low LME inventories — the lowest since 1990, at just 245,975 tons — and a weaker U.S. dollar that made the metal more attractive to international buyers. Seasonal demand expectations in China added further support, lifting prices to a three-week high of $3,328.50 per metric ton on September 3.

How significant is the impact of production restarts like EGA's Al Taweelah smelter?

Production restarts add supply back to the market, which can ease shortages and cap price gains. EGA's restart of 18% of Al Taweelah's reduction cells by mid-August is a meaningful step but may take time to fully offset the tightness reflected in record-low LME stocks of 245,975 tons.

What role do Chinese exports play in the aluminum market?

China is a major producer and consumer of aluminum. Its 18.7% year-on-year export surge in July has helped alleviate global shortages, and Wood Mackenzie's revised deficit estimate — cut from 2.5–3 million tons to roughly 900,000 metric tons — partly reflects that shift in trade flows.

How might EU regulations affect aluminum trade in Europe?

The EU's decision to pursue a delegated act banning waste exports, including aluminum scrap, along with the upcoming Carbon Border Adjustment Mechanism deadline of September 30, 2027 for 2026 imports, will influence sourcing costs and trade flows. These measures could tighten scrap availability within Europe and alter the competitiveness of domestically produced versus imported aluminum.

What is Goldman Sachs's price forecast for aluminum in late 2026?

Goldman Sachs, in its October 2025 forecast, predicted a market surplus in 2026/2027 and projected LME aluminum prices could fall to $2,350 per ton in the fourth quarter of 2026. This bearish target contrasts sharply with the current trading level near $3,310 per ton, signaling that the bank expects supply growth and easing deficits to eventually weigh on prices.

What to Watch Next

Market participants should keep an eye on LME and Shanghai inventory reports, scheduled monetary policy announcements from the U.S. Federal Reserve, and updates on EU regulatory measures. Goldman Sachs has forecast a market surplus in 2026/2027 and projects LME prices could decline to $2,350 a ton in the fourth quarter of 2026 — a bearish signal worth tracking against any near-term inventory-driven strength. The interplay of these factors will be critical in determining whether aluminum prices sustain their recent rally or face downward pressure later in 2026.

For continuous updates on commodities, visit our Market Today section.

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Sources: - MINING.COM: Aluminium climbs to three-week high on supply tightness, softer dollar - Wood Mackenzie: 2026 Aluminum Market: The Aluminum Shortage Is Easing - Newsquawk: EU industry chief ditches proposal to use trade measures to curb aluminium scrap exports - Aegis Market Insights: Goldman Sachs Forecasts Aluminum Surplus in 2026/27

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Sources

• Aluminium climbs to three-week high on supply tightness, softer dollar - MINING.COM
• Aluminum - Price - Chart - Historical Data - News - Trading Economics
• 2026 Aluminum Market: The Aluminum Shortage Is Easing. The Cost Pressure Isn't.
• Goldman Sachs Forecasts Aluminum Surplus in 2026/27 | Aegis Market Insights
• EU industry chief ditches proposal to use trade measures to curb aluminium scrap exports; preparing a delegated act to ban exports of waste, including aluminium