The ramp-up of smelters in the Middle East, a surge in supply from Indonesia, robust exports of semi-fabricated products from China, and softer global demand have collectively shifted the outlook for aluminum. Consequently, TD Commodity Strategy has downgraded its price projections for the metal. As the market edges closer to supply-demand equilibrium in the coming years, prices are now expected to average $3,378 per tonne in 2026 and $3,281 per tonne in 2027, representing declines of 5.0% and 9.8% respectively compared to previous forecasts.
Adjusted Deficit Projections
The firm now anticipates market deficits of 1.2 million tonnes for 2026 and 234 thousand tonnes for 2027. These figures represent a significant departure from the earlier consensus, which had projected a deficit of 2.5 to 3.0 million tonnes in 2026 and a shortfall of 1.0 to 1.5 million tonnes in 2027. The forward curve has also transitioned from backwardation, which once exceeded $100 per tonne at the height of the crisis, into contango as near-term supply conditions improve. As a result, there is no longer a widespread market expectation that prices will breach the $3,780 per tonne threshold.
Market Sentiment and Technical Levels
From both fundamental and technical perspectives, the market is currently viewed as somewhat oversold. Given the diminished incentive to liquidate long positions, the metal is expected to find significant support within the $3,100 to $3,400 per tonne trading range through 2027. Investors globally remain cautious, as escalating tensions in the Middle East dampen risk appetite across various asset classes.
Global Market Context
Geopolitical uncertainty continues to impact financial markets broadly. The GBP/USD pair has retreated from a three-week high above 1.3430, finding it difficult to gain traction despite easing political uncertainty in the UK. Similarly, EUR/USD is struggling to maintain bullish momentum after reaching the 1.1450 area, sliding toward 1.1400. Gold remains near $4,100, as fears of persistent inflation may lead central banks to tighten monetary policy. Meanwhile, Bitcoin is trading around $63,000, as geopolitical instability keeps a lid on risk-on sentiment. Furthermore, central banks including the Federal Reserve and the European Central Bank are increasingly pushing back against providing specific forward guidance to markets.
