Goldman Sachs Base Metals: Stress-Testing Our Bearish Aluminium Call
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
Goldman Sachs remains structurally bearish on aluminium despite prices surging 24% to $3,225 per tonne, driven by low inventories and supply concerns. The firm has revised its H1 2026 LME aluminium price forecast upward to $3,150 per tonne from $2,575, and its Q4 2026 forecast to $2,500 per tonne. However, it maintains a longer-term projection of $2,400 per tonne for 2027. The bank argues that current prices above $3,000 reflect an unsustainable scarcity premium.
The core thesis relies on accelerating supply growth, particularly from Indonesia, coupled with decelerating demand. Indonesian production is expected to increase by 725 kilotonnes in 2026 and 900 kilotonnes in 2027, with relatively low power supply risks. Meanwhile, Chinese end-demand is contracting, and the historically robust demand drivers of solar and automotive are stalling, with solar aluminium intensity dropping as cell efficiency improves.
Goldman Sachs anticipates the market will transition into a sustained surplus: 800 kilotonnes in 2026, 1.6 million tonnes in 2027, and 2.3 million tonnes in 2028. This structural oversupply is exacerbated by "China Shock 2.0," where Chinese engineering firms are halving smelter construction costs and accelerating build times. With investor bullishness near five-year highs and prices significantly exceeding fundamental fair value of roughly $2,500 per tonne, Goldman maintains its short LME aluminium recommendation and initiates a long SHFE alumina and short SHFE aluminium trade.