Military conflicts in the Middle East are reshaping the global aluminum market landscape.
According to data from &#34;Chasing Wind Trading Desk,&#34; Goldman Sachs, in a report on March 31st, urgently raised its LME aluminum price target for Q2 2026 to $3,450 per ton (previously $3,200 per ton), and its full-year average price forecast was also raised from $3,100 per ton to $3,200 per ton.
Analysts warned that due to missile and drone attacks on two core aluminum industry facilities in the Middle East, the global aluminum market's supply-demand balance has been completely reversed – from a previously anticipated surplus of 550,000 tons to a sudden deficit of 570,000 tons.
However, the upside for aluminum prices is limited and has a clear boundary. Goldman Sachs stated that the deficit is highly concentrated in Q2 2026 (a shortfall of 1.2 million tons). As new capacity in Indonesia is gradually released in the second half of the year, the market will shift to a small surplus in Q4 (approximately 190,000 tons). By 2027, with a significant return of supply, the global aluminum market will experience a substantial surplus of up to 1.3 million tons, at which point the average aluminum price will fall sharply from $3,200 per ton to $2,750 per ton. The upward window is concentrated in the first half of this year, and grasping the timing is crucial.
<h2>Two Major Middle Eastern Aluminum Giants Attacked, Combined Capacity Accounts for 4% of Global Output</h2>
The core of this impact is the simultaneous damage to two major aluminum industry facilities in the Middle East.
The Al Taweelah smelter (annual capacity of 1.6 million tons) under Emirates Global Aluminium (EGA) in the UAE suffered missile and drone attacks, with the plant's announcement stating the damage was &#34;severe.&#34; Bahrain Aluminum (Alba)'s 1.6 million-ton capacity facility in Bahrain was also struck on March 28th (Saturday), and damage assessment work is ongoing.
The combined annual capacity of these two facilities is 3.2 million tons, accounting for approximately 4% of the world's total primary aluminum production. The extent of the damage remains unclear, posing a significant uncertainty for supply.
Goldman Sachs noted that even before these attacks, Alba had voluntarily initiated a controlled shutdown of production lines 1 to 3 on March 14th, representing 19% of its total capacity. These military strikes have further heightened market concerns about the overall supply outlook for the Middle Eastern aluminum industry.
<h2>Supply Shock Surpasses Demand Decline, Aluminum Price Targets Fully Raised</h2>
In response to this situation, Goldman Sachs has fundamentally revised its 2026 aluminum market supply and demand forecasts.
Specifically, Goldman Sachs significantly lowered its UAE aluminum production forecast for 2026 from 2.7 million tons to 1.95 million tons, and its Bahrain aluminum production forecast from 1.5 million tons to 1.1 million tons.
Analysts clearly emphasized: the negative impact of this supply disruption has exceeded the demand-depressing pressure from the global GDP slowdown. After offsetting each other, the net effect on the aluminum market remains a significant tightening.
In terms of price forecasts, Goldman Sachs raised its average LME aluminum price forecast for 2026 from $3,100 per ton to $3,200 per ton, and its Q2 price target was increased from $3,200 per ton to $3,450 per ton, largely in line with current futures prices.
<h2>Deficit Concentrated in Q2, Gradually Easing in H2 with Release of New Indonesian Capacity</h2>
Breaking down by time, the intensity of this round of aluminum market deficit is highly concentrated in the second quarter of 2026.
Goldman Sachs expects the global aluminum market deficit in Q2 to reach 1.2 million tons, the absolute main driver of the 570,000-ton deficit for the full year.
As the second half of the year approaches, supply and demand pressure is expected to ease marginally. Goldman Sachs predicts that as new Indonesian capacity gradually ramps up, the global aluminum market will return to a slight surplus in Q4 2026, with a surplus of about 190,000 tons. This seasonal supply-demand rotation means that the strongest driver for aluminum prices will be concentrated in the first half of this year, and prices will face increasing pressure in the second half as supply recovers.
<h2>Extreme Scenario Calculation: Average Aluminum Price Could Reach $3,400, Surpassing European Energy Crisis Peak</h2>
Goldman Sachs also conducted stress tests for extreme scenarios.
If the combined production of Bahrain, the UAE, Qatar, and Iran in 2026 decreases by 50% (compared to an approximate 30% reduction in the baseline scenario), global inventories will fall to critical lows. Even with demand contraction due to downward revisions in economic growth expectations, the average annual aluminum price could still reach $3,400 per ton.
This price level is $700 per ton higher than the average aluminum price during the European energy crisis in 2022, which would set a historical record.
Goldman Sachs believes that the core triggers for upside risks include: actual damage to affected facilities exceeding current assumptions, further military strikes leading to more capacity shutdowns, and passive production halts caused by disruptions in raw material or natural gas supply.
<h2>Major Supply Return in 2027, Aluminum Market Shifts from Deficit to a Significant Surplus of 1.3 Million Tons</h2>
Although the average aluminum price forecast for 2027 was slightly raised to $2,750 per ton (previously $2,700 per ton), Goldman Sachs remains cautious about the aluminum market outlook for next year.
Analysts clearly expect the global aluminum market to experience a substantial surplus of 1.3 million tons in 2027, with an aluminum price forecast of only $2,600 per ton in Q4 2027. At that point, aluminum smelter profit margins will return to a reasonable match with inventory coverage days.
The pace of supply return is largely determined.
Goldman Sachs points out that restarting cold-idled capacity takes at least 6 months, and the restart cycle for damaged capacity is likely to be even longer.
However, as new capacity in places like Indonesia continues to ramp up, the market will rapidly switch from deficit to a significant surplus in 2027. From 2028 onwards, Goldman Sachs' forecasts for aluminum market supply-demand balance and prices remain unchanged – low-cost new supply will keep the aluminum market in a surplus pattern, exerting long-term downward pressure on aluminum prices. When positioning in aluminum-related assets, accurately grasping the timing of supply-demand rotation will be the key variable determining the success or failure of investment.

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Middle East missile attacks have severely impacted 4% of global aluminum capacity. Goldman Sachs urgently raised its aluminum price target for Q2 2026 to $3,450/ton. The global aluminum market has sharply reversed from a 550,000-ton surplus to a 570,000-ton deficit – but this window is fleeting. In 2027, a major supply return will bring a surplus of 1.3 million tons; timing is everything

- Military conflicts in the Middle East are reshaping the global aluminum market, prompting Goldman Sachs to raise its Q2 2026 LME aluminum price target from $3,200 to $3,450 per ton.  
- The attacks on major aluminum facilities have transformed an expected surplus of 550,000 tons into a shortage of 570,000 tons, with Q2 alone predicted to face a 1.2 million ton deficit.  
- By 2027, a significant oversupply of 1.3 million tons is expected, leading to a price drop to an average of $2,750 per ton as new supply comes online.

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Goldman Sachs: Middle East conflict triggers aluminum shortage this year, but a significant surplus will emerge next year as supply returns