Who is swimming naked when the tide goes out? Goldman Sachs warns: severe oversupply, prices of aluminum, lithium, and iron ore will plummet in 2026, only copper prices will "stand out"

Since the beginning of this year, driven by macroeconomic tailwinds such as expectations of interest rate cuts by the Federal Reserve, the depreciation of the US dollar, and improved growth prospects in China, industrial metal prices have generally surged. On Wednesday, copper prices even briefly reached a historic high of $11,540 per ton.

According to the Chase Wind Trading Desk, Goldman Sachs issued a warning in a report released on December 3rd: This wave driven by speculative sentiment is about to recede, and the industrial metal market is facing a serious supply surplus, except for copper.

• Copper (bullish): Although the recent breakthrough of $11,000 per ton is not sustainable, copper remains Goldman Sachs' "preferred" metal. Due to structural demand from the power grid and AI infrastructure, there is a solid bottom for copper prices at $10,000 per ton.
• Aluminum, lithium, iron ore (bearish): These three metals will fully enter a surplus cycle by 2026. Goldman Sachs predicts that by the end of 2026, aluminum, lithium, and iron ore prices will drop by 18%, 23%, and 17%, respectively, compared to spot prices.

Copper: The "Chosen One" with Limited Supply and Strong Demand

Goldman Sachs is optimistic about the outlook for copper, but also emphasizes that its price will not rise indefinitely. The report suggests that by 2026, copper prices will operate within the range of $10,000 to $11,000.

The strength of the copper market mainly stems from two aspects:

• Structural bottlenecks on the supply side: The report points out that this year, several major copper mines globally (such as Kamoa-Kakula and El Teniente) have experienced accidents, highlighting the challenges posed by aging mines and complex geology. The limited growth in mine supply provides solid bottom support for copper prices.
• Structural growth on the demand side: Investments in strategic areas such as power grid upgrades, power infrastructure, artificial intelligence, and defense are generating strong and sustained demand for copper. Goldman Sachs estimates that just from the power grid and power facilities, over 60% of copper demand growth will be contributed by 2030.

Investors should pay attention to a short-term catalyst specifically mentioned by Goldman Sachs: Market expectations that the US may impose at least a 25% tariff on refined copper by mid-2026. This has led traders to preemptively ship copper to the US for stockpiling, tightening supply in markets outside the US. Based on this, Goldman Sachs raised its average LME copper price forecast for the first half of 2026 from $10,415 per ton to $10,710 per ton.

Nevertheless, Goldman Sachs also cautions that the recent breakthrough of copper prices above $11,000 is mainly based on "expectations" for the future, rather than current fundamentals. The firm predicts a global copper market surplus of 500,000 tons in 2025, narrowing to a surplus of 160,000 tons by 2026, with the market only transitioning from surplus to balance, and no severe shortages expected in the short term.

Aluminum: The Biggest Loser After the Tide Recedes, Target Price Set Low at $2,350

The aluminum market is facing a double whammy of supply and demand, and Goldman Sachs recommends shorting aluminum.

1. A supply tsunami is coming: The current high prices are stimulating excessive new supply, especially from new capacities in Indonesia and India. Goldman Sachs expects the global aluminum market to shift from balance this year to a surplus of 1.1 million tons by 2026. A series of investment projects by China overseas will concentrate on releasing capacity in 2026.

2. Demand side faces substitution risks: As the copper-aluminum price ratio expands, although some sectors are seeing "aluminum replacing copper," in the automotive manufacturing sector, manufacturers are shifting from aluminum to cheaper steel due to cost considerations. For example, U.S. steel producer Cleveland-Cliffs has announced it will provide steel alternatives to customers affected by aluminum supply disruptions.

3. Price forecast: In light of the above factors, Goldman Sachs maintains a bearish stance, expecting LME aluminum prices to fall to $2,350/ton in the fourth quarter of 2026.

Lithium: The rebound is just a "dead cat bounce," and the supply floodgates are about to open

Despite lithium prices recently rebounding from a five-year low and even surpassing $11,000/ton (lithium carbonate), this is merely a short-term phenomenon.

1. Short-term tightness due to energy storage demand: Goldman Sachs has raised its short-term lithium price forecast due to stronger-than-expected demand for energy storage systems (ESS) and the suspension of operations at some lithium mica mines in China due to losses, which has reduced raw material supply.

2. Return to a crash in the second half of 2026: This tightness is unsustainable. With an increase in spodumene supply from Africa and Australia, as well as the restart of previously closed lithium mica capacities in China, the market will return to looseness in the second half of 2026. Goldman Sachs predicts that by the end of 2026, lithium prices will drop 23% from spot prices to around $9,500/ton.

Iron ore: Port inventories surge, prices will fall below $90

The fundamentals of iron ore have deteriorated significantly in recent months, and the outlook for 2026 is even gloomier.

1. Facing both supply shocks and demand shrinkage: Goldman Sachs expects China's port iron ore inventories to surge by 51 million tons in 2026.

• Supply side: In addition to incremental increases from Australia and Brazil, Guinea's Simandou project will deliver 20 million tons of iron ore to the market next year.
• Demand side: Global seaborne iron ore demand is expected to decline by 1% in 2026, with China's steel production expected to decrease by 2%.

2. Price forecast: To push high-cost seaborne supplies (such as Indian exports) out of the market, iron ore prices must fall. Goldman Sachs predicts that SGX iron ore prices will drop to $88/ton by the end of 2026 (adjusted to $86/ton according to Platts index specifications).

Goldman Sachs' report reveals a harsh reality: the current rise in industrial metals is largely built on sand. For investors, the strategy for 2026 should be to "distinguish the genuine from the false"—go long on copper with structural shortage logic while firmly avoiding or shorting aluminum, lithium, and iron ore, which will face significant supply pressures