Key Moments
- BCA Research notes that constrained Chinese primary aluminum production and a wide copper-aluminum price spread are currently supporting aluminum prices.
- The firm anticipates that by 2026, weakening global manufacturing conditions will pressure aluminum demand and prices.
- BCA expects increased Chinese secondary production and overseas capacity growth by Chinese producers to offset slowing primary supply growth.
Near-Term Support from Supply Constraints and Copper Spread
Aluminum prices are expected to stay relatively firm in the near future, according to BCA Research, as the market continues to be underpinned by tight Chinese primary supply and a substantial price gap between copper and aluminum.
A central factor is the constraint on Chinese primary aluminum output. China is moving close to its 45 million metric tonne annual capacity ceiling, a cap that was originally introduced in 2017 and reaffirmed in the 2025-2027 Action Plan.
“In other words, Chinese primary aluminum output is nearing its limits,” Roukaya Ibrahim, chief commodity strategist at BCA, said in a note.
BCA highlights that this situation effectively draws a line under a multi-decade phase of expansion that contributed more than 80% of global primary aluminum supply growth. With limited signs that production outside China has significantly picked up, the supply backdrop remains supportive for aluminum prices in the short term.
Aluminum prices end 2025 on a high, let’s see if pricing has more steam for next few years 🤔
Aluminum demand is 💪 while supply could be restriction as China is at 97% utilisation levels #StocksInFocus
Hindalco
Nalco
Vedanta— Nigel D'Souza (@Nigel__DSouza) December 23, 2025
Substitution Demand Backed by Copper Discount
On the demand side, aluminum has benefited from its pricing relationship with copper. A notable discount of aluminum to copper has encouraged users to substitute aluminum in certain applications, particularly in electrical uses.
Aluminum prices have moved higher along with copper in recent months, and Ibrahim noted that, “as long as the red metal’s premium remains wide, substitution is likely to act as a tailwind to aluminum demand and prices.”
2026 Outlook: Cyclical Headwinds and Softer Demand
The tone shifts as the market approaches 2026. BCA Research expects the current supports to weaken as cyclical conditions deteriorate, weighing on both aluminum demand and pricing.
Ibrahim points to softness in the new orders component of the global PMI as an indication of looming headwinds for manufacturing. She expects the PMI to fall into contraction territory next year, a development that would likely pressure aluminum consumption.
According to the note, this slowdown would not only dampen direct demand for aluminum but could also lessen its attractiveness as a substitute if copper prices also retreat.
Shifting Supply Mix and the Role of Power Costs
On the supply front, BCA expects structural changes to moderate the impact of constrained Chinese primary output. Ibrahim believes that growth in Chinese secondary aluminum production, together with overseas capacity expansion by Chinese producers, will help compensate for the slowdown in primary aluminum supply growth from China.
Electricity prices are highlighted as a critical driver of how the global supply landscape adjusts. Ibrahim notes that power costs vary significantly by region and will be a key factor in determining how rapidly aluminum production responds to limits on Chinese primary capacity.
Summary of Key Aluminum Market Drivers
| Factor | Current Impact | Expected Impact Heading into 2026 |
|---|---|---|
| Chinese primary aluminum capacity cap | Supports prices by constraining supply | Growth in primary output slows as cap is approached |
| Copper-aluminum price spread | Wide spread encourages substitution into aluminum | Substitution benefit may fade if copper prices decline |
| Global manufacturing cycle (PMI, new orders) | Currently supportive but showing signs of weakness | Expected contraction pressures demand and prices |
| Secondary production and overseas Chinese capacity | Growing but not fully offsetting primary constraints yet | Expected to help offset slower Chinese primary growth |
| Electricity costs by region | Influence relative competitiveness of smelters | Key determinant of how quickly global supply adjusts |
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