Gulf production recovery falters, China steps up as OCBC raises aluminium forecast to $3,150
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OCBC has raised its end-2026 aluminium price forecast to about USD 3,150 per tonne from USD 3,050, citing a slower-than-expected recovery in Gulf production, although strong Chinese output is expected to continue offsetting supply disruptions.
Three-month aluminium on the London Metal Exchange (LME) fell 0.9 per cent month-on-month in September to USD 3,214 per tonne as of September 29, remaining 2 per cent above OCBC’s third-quarter forecast of USD 3,150.
The cash-to-three-month spread was broadly unchanged at a USD 7.40-per-tonne contango, compared with USD 7.60 at the end of August.
The spread suggests limited urgency for immediate metal supply despite a continued decline in global exchange inventories.
Gulf aluminium recovery loses momentum
OCBC said aluminium production across the Gulf Cooperation Council (GCC) appears to have lost momentum, with output growth slowing to 2 per cent month-on-month in August from 6.2 per cent in July.
Production continues to face disruptions linked to the Middle East conflict, suggesting that earlier expectations for a rapid restart may have been too optimistic.
The slower recovery has prompted OCBC to raise its aluminium price forecast, although the bank continues to expect prices to moderate from current levels as Gulf production gradually returns.
China offsets Gulf supply shortfall
China continues to compensate for reduced Gulf supply, with aluminium production running close to record levels.
Chinese aluminium output increased 4.7 per cent year-on-year in August, accelerating from 3.1 per cent in July. Exports of unwrought aluminium and aluminium products also remained strong, rising 17.3 per cent year-on-year compared with 18.7 per cent in July.
OCBC expects robust Chinese production to continue offsetting reduced Gulf supply as operations in the region are progressively restored.
Emirates Global Aluminium (EGA) reported in late August that 25 per cent of the reduction cells at its Al Taweelah facility had been restored, with full production targeted by the first quarter of 2027.
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Aluminium prices expected to moderate
Despite raising its forecast curve, OCBC said its broader outlook remains unchanged, with aluminium prices expected to gradually ease towards USD 3,150 per tonne by the end of the fourth quarter of 2026.
The bank sees no strong catalyst for aluminium prices in either direction through the first quarter of 2027.
A further deterioration in Gulf production or a slower restart without additional Chinese supply represents the key upside risk to prices. Conversely, a faster-than-expected Gulf recovery or weaker global demand could accelerate the anticipated price moderation.
OCBC has raised its end-2026 aluminium price forecast to about USD 3,150 per tonne from USD 3,050, citing a slower-than-expected recovery in Gulf production, although strong Chinese output is expected to continue offsetting supply disruptions.
Three-month aluminium on the London Metal Exchange (LME) fell 0.9 per cent month-on-month in September to USD 3,214 per tonne as of September 29, remaining 2 per cent above OCBC’s third-quarter forecast of USD 3,150. The cash-to-three-month spread was broadly unchanged at a USD 7.40-per-tonne contango, compared with USD 7.60 at the end of August.
The spread suggests limited urgency for immediate metal supply despite a continued decline in global exchange inventories.
Gulf aluminium recovery loses momentum
OCBC said aluminium production across the Gulf Cooperation Council (GCC) appears to have lost momentum, with output growth slowing to 2 per cent month-on-month in August from 6.2 per cent in July.
Production continues to face disruptions linked to the Middle East conflict, suggesting that earlier expectations for a rapid restart may have been too optimistic.
The slower recovery has prompted OCBC to raise its aluminium price forecast, although the bank continues to expect prices to moderate from current levels as Gulf production gradually returns.
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China offsets Gulf supply shortfall
China continues to compensate for reduced Gulf supply, with aluminium production running close to record levels.
Chinese aluminium output increased 4.7 per cent year-on-year in August, accelerating from 3.1 per cent in July. Exports of unwrought aluminium and aluminium products also remained strong, rising 17.3 per cent year-on-year compared with 18.7 per cent in July.
OCBC expects robust Chinese production to continue offsetting reduced Gulf supply as operations in the region are progressively restored.
Emirates Global Aluminium (EGA) reported in late August that 25 per cent of the reduction cells at its Al Taweelah facility had been restored, with full production targeted by the first quarter of 2027.
Aluminium prices expected to moderate
Despite raising its forecast curve, OCBC said its broader outlook remains unchanged, with aluminium prices expected to gradually ease towards USD 3,150 per tonne by the end of the fourth quarter of 2026.
The bank sees no strong catalyst for aluminium prices in either direction through the first quarter of 2027.
A further deterioration in Gulf production or a slower restart without additional Chinese supply represents the key upside risk to prices. Conversely, a faster-than-expected Gulf recovery or weaker global demand could accelerate the anticipated price moderation.
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