At a time when aluminium prices are climbing sharply, alumina - the very raw material that feeds it - is barely moving. This unusual split raises a simple question: why is the input material weakening while the output strengthens? The answer lies in a mix of supply, expansion, demand shifts, and geopolitical shocks that are pulling the two markets apart.
The divergence has been clearly visible since late 2025, with both commodities moving in opposite directions and creating an imbalance across the value chain.
Alumina price opened 2026 at USD 304 per tonne and briefly touched USD 309.14 in early January, but failed to sustain momentum. Prices stayed confined to a narrow range through the month before softening. By mid-March, they had dropped to USD 300.14 per tonne and eventually settled at USD 306.8 per tonne by the end of the quarter.
This declining trend was also evident in the final quarter of 2025, as prices gradually fell from USD 321 per tonne in October to USD 310.18 per tonne by year-end.
In sharp contrast, primary aluminium price has moved in the opposite direction. Starting at USD 2,986 per tonne, prices surged to USD 3,221 per tonne by mid-January, setting the tone for a strong rally. Momentum accelerated further in March, with prices hitting USD 3,520 per tonne on March 13 and it closed at USD 3,585 per tonne on March 31.
Overall, aluminium recorded a sharp rise of around 20 per cent, while alumina saw only a marginal increase of about 0.9 per cent, remaining largely flat with a clear downward bias.
To know more about the global primary aluminium industry 2026 outlook, read our report “Global Aluminium Industry Outlook 2026”.
Why alumina prices are under pressure?
The key to alumina’s weakness lies in over supply. Global metallurgical-grade alumina production reached 144,975 thousand tonnes in 2025, while consumption by aluminium smelters was about 143.91 million tonnes, resulting in a surplus of roughly 1 million tonnes.
If we see the data, January–February alumina output increased from 22,001 thousand tonnes in 2024 to 23,307 thousand tonnes in 2025, reflects a year-on-year increase of about 5.9 per cent and further to 23,533 thousand tonnes in 2026, indicating a steady rise in production.
Aluminium production figures also point to a similar trend. In 2025, alumina output stood at 144.97 million tonnes, while aluminium production was 73.79 million tonnes. Based on the 2:1 conversion ratio, this volume of alumina could produce around 72.5 million tonnes of aluminium, indicating an excess of roughly 1 million tonnes of alumina, similar to the surplus. Also read: Global alumina output nears 143.5 Mt in 2025, leaving 0.8 Mt surplus - what’s driving the shift and how are top producers adjusting?.
The same pattern carries into early 2026, with alumina production at 23.5 million tonnes in the first two months, compared to aluminium output of 12 million tonnes.
Which region is responsible for the major growth?
A major share of this production growth is coming from Asia and Africa, where expansion activity remains strong.
Capacity additions are further intensifying the pressure. China continues to dominate the supply landscape, with total alumina capacity reaching 110.32 million tonnes in 2025. Of this, operating capacity stood at 89.41 million tonnes, with utilisation at around 81 per cent. With four new projects expected to add 8.6 million tonnes in 2026, China’s total capacity is projected to rise to 118.92 million tonnes.
Indonesia has been particularly aggressive in ramping up output. Around 2 million tonnes per year of capacity was added in the first quarter of 2026 alone, with half of it commissioned in late 2025. The country’s total capacity has now reached 7.5 million tonnes and continues to grow, supported by bauxite quotas of up to 25 million tonnes, pushing exports beyond 5 million tonnes.
India is also expanding its footprint. Vedanta Aluminium has increased the capacity of its Lanjigarh refinery in Odisha to 5 million tonnes per annum, taking the country’s total alumina capacity close to 13 MTPA and positioning it as the third-largest producer globally.
In 2026, Indonesia and India are set to add 1 million tonnes and 500,000 tonnes of capacity respectively, underscoring Asia's crucial role in future global alumina supply growth.
How Is geopolitics widening the divide further?
If oversupply explains part of the story, geopolitics explains the rest. The Iran-US conflict, which escalated into direct strikes in early 2026, has disrupted major aluminium smelters in the Middle East.
Producers such as Emirates Global Aluminium and Aluminium Bahrain have been hit, with Alba shutting 19 per cent of its capacity and Qatalum initiating a controlled shutdown of its 648,000-tonne-per-year plant. Together, these account for about 9 per cent of global aluminium production.
The result is a split impact. Smelter shutdowns reduce alumina consumption, adding to oversupply, while at the same time tightening aluminium supply. The conflict could remove 3–3.5 million tonnes of aluminium output -around 5 per cent of global supply-and put nearly 7 million tonnes at risk, according to Wood Mackenzie.
Indonesia’s state aluminium producer has warned of oversupply and called for a moratorium on new refineries, pointing to a mismatch between rising capacity and falling demand. Even with additional supply expected from China, India and Russia, including RUSAL, replacement volumes are unlikely to fully offset Middle Eastern losses.
This is likely to sustain the alumina surplus as ongoing smelter shutdowns continue to weaken demand.
Upcoming capacity additions may ease market imbalance
Against this backdrop, efforts are underway to rebuild and expand aluminium capacity. In the United States, Emirates Global Aluminium and Century Aluminum have agreed to build a 750,000-tonne-per-year smelter in Oklahoma-the first new plant since 1980-though construction will begin only in late 2026.
Canada continues to play a key role, exporting about USD 10.8 billion worth of aluminium annually, supported by major producers such as Rio Tinto and Aluminerie Alouette.
At the same time, new smelting capacity of around 2–3 million tonnes is expected across Southeast Asia, the US and India. Indonesia is advancing multiple projects, including Adaro’s PT Kalimantan Aluminum Industry Phase II (500,000 tonnes/year by Q4 2026), Tsingshan/Xinfa’s Taijing project (180,000 tonnes /year in Q3 2026), and Juwan in Weda Bay (250,000 tonnes/year by Q1 2026).
In India, Hindalco is expanding its Odisha smelter as part of a broader INR 210 billion (USD 2.3 billion) investment plan, which also includes flat-rolled and battery foil facilities.
This indicates that alumina prices are likely to remain in a decline phase, with an estimated oversupply of around 1.3 million tonnes in 2026 continuing to weigh on the market.
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