Citi Maintains Bullish Outlook on Aluminum Prices: Middle East Supply Gap Exceeds 3 Million Tons
Claire Weston
Citi maintains its bullish aluminium call, anchored by conflict-driven annualised Middle East supply losses above 3 million tonnes — among the worst in 50 years — with full capacity recovery unlikely before 2028.
Why is this supply disruption worse than past ones?
Citi estimates Middle East annualised aluminium supply losses now exceed 3 million tonnes, against normal output of roughly 6.8–6.9 million tonnes — a gap approaching half.
This means → unlike previous episodes where smelters cut voluntarily because demand fell, this time facilities were forcibly shut by military strikes or shipping disruptions. Repair timelines are far longer.
Under Citi's base case, Middle East capacity does not approach normal levels until 2028.
Can slower demand close the gap?
Citi has already cut its global aluminium demand growth assumption from a long-run ~3% to ~1.9% — yet even so, primary aluminium faces a structural deficit of roughly 2.3 million tonnes this year.
In plain terms = demand has been pencilled in at the low end, and the supply gap still does not close.
Citi argues that even a severe recession on the scale of 2008–09 would struggle to rebuild inventories quickly from the current low base.
Could China lift its capacity cap to fill the hole?
Some market participants expect China to relax its ~45-million-tonne primary aluminium capacity ceiling. Citi sees this as low-probability, for three reasons:
One: smelter margins are recovering — lifting the cap would compress profits, contradicting supply-side reform goals. Two: China has stopped large-scale greenfield smelter builds for a decade, relying on capacity swaps; lifting the cap would undermine that policy signal. Three: China imports roughly 2 million tonnes of primary aluminium from Russia; Beijing is unlikely to relax the cap just because import volumes rise.
This means → the world's largest aluminium capacity pool is unlikely to open the floodgates in the near term.
Can new capacity elsewhere make up the shortfall?
Citi expects Indonesia to add roughly 800,000–900,000 tonnes this year — meaningful, but modest compared with the millions of tonnes China once added annually during price upswings.
Projects in Vietnam, Angola and Saudi Arabia's Red Sea coast are mostly post-2028 start-ups; a ~500,000-tonne capacity loss in Mozambique further offsets new additions.
In plain terms = new mines and smelters are in the pipeline, but almost none will produce aluminium before the tightest window of the deficit has passed.
Is there a new variable on the demand side?
Four years ago, decarbonisation-linked demand — solar-panel aluminium frames, EV body structures — accounted for just 1–2% of total aluminium consumption. That share is now approaching 20%.
This means → this category is less sensitive to economic cycles, partially offsetting any cyclical demand weakness from a macro slowdown.
Citi stresses that the real bottleneck in the aluminium supply chain is not alumina or bauxite but stable, affordable electricity — the fundamental reason new capacity elasticity remains constrained.
How high could aluminium prices go?
Citing historical data, Citi notes that in extreme inventory-depletion scenarios European spot prices have been repriced to very high levels. As a theoretical comparison, the bank references a figure equivalent to roughly $11,000 per tonne in today's dollars.
Citi explicitly states this is not a current price forecast — it is used to illustrate how elastic aluminium prices can be under extreme supply stress.
This reflects the crux of Citi's bull case: whether enough new capacity can come online before 2028 to bridge the gap — if not, the upside may far exceed what the market currently prices in.
Content is for reference only, not financial advice.