Rising Chinese aluminum output offsets Gulf supply losses

what happened

Expanding aluminum output and exports from China are making up for disrupted supply from the Persian Gulf, keeping prices in check for one of the most widely used metals. According to Analysis, Chinese smelters have increased production in recent months despite higher energy costs, supported by healthy margins and cheaper raw materials as new processing capacity comes on stream.

Earlier this year, the Middle East conflict took several hundred thousand tons of regional smelting capacity offline and blocked a key shipping lane. Gulf producers account for roughly a tenth of global output, so fears of a sharp shortfall ran high. China's aluminum exports rose 16% year on year in the first eight months of 2026, adding about 670,000 metric tons, according to the U.S. International Trade Administration, which partly offset a drop of roughly 970,000 tons from the UAE.

why it matters

More supply from China and Indonesia, along with the gradual restart of Gulf output, points to a looser market, according to Morgan Stanley, which projects a surplus above 800,000 tons in 2027 and prices falling to $2,800 a ton. Commerzbank notes that a deeper surplus could push Beijing to enforce its 45-million-ton smelting capacity cap more strictly.

market impact

Aluminum: extra supply from China puts downward pressure on LME futures prices

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