As 2026 unfolds, aluminum prices have outperformed market expectations.
According to the Zhui Feng Trading Desk, Citigroup has released a new research report indicating that a structural bull market for aluminum is forming, with both macroeconomic and fundamental factors jointly driving prices higher. The bank has raised its 0-3 month price target from $2,950 per ton to $3,400 per ton.
Citigroup's analyst team stated that the rally in aluminum prices at the beginning of 2026 reflects investors beginning to price medium-term bullish expectations into short-term valuations ahead of schedule. Although this round of gains is primarily driven by financial demand, fundamental support remains solid, and the bank's assertion from its annual outlook that a "structural bull market will commence from 2026" remains unchanged.
The report points out that the policy signal from China's Central Economic Work Conference pledging to "stop the decline and promote a rebound," coupled with strong export data at the end of 2025, provides macroeconomic support for aluminum prices. Citigroup forecasts that the aluminum market will experience a slight structural deficit of 61 kilotons in 2026, which is expected to expand to 847 kilotons by 2027.
However, Citigroup maintains a cautious stance on the pace of price increases, noting that some short-term physical indicators in China still lag behind price trends, which could trigger periodic corrections. For consumers with long-term exposure, such pullbacks may present hedging opportunities.
Macroeconomic and Policy: The "Front-loading" and Recovery of Chinese Demand Citigroup economists predict that the growth rate of China's fixed asset investment will turn positive to 2.0% in 2026, a significant improvement from the -2.8% seen in 2025. Within this, infrastructure investment growth is expected to rebound sharply from -1% to 6%, while manufacturing investment growth is projected to increase from 1.5% to 5%. Policy focus will continue to center on domestic new economy sectors, which are aluminum-intensive.
China announced on January 9th that it will cancel export tax rebates for photovoltaic-related products effective April 1, 2026. Citigroup anticipates this policy adjustment will trigger a surge in exports during the first quarter as manufacturers maximize rebate benefits before the deadline. This dynamic is expected to boost demand for aluminum extrusions, particularly for PV module frames and structural profiles, providing incremental support for aluminum consumption in early 2026.
Cross-metal linkage effects are also significant. Citigroup notes that the constructive outlook for the copper market continues to support aluminum prices through shared macroeconomic themes and correlations, amplifying the financial flows into the sector. Furthermore, increasing discussions about aluminum substituting for copper in air conditioning applications further strengthen the logic for incremental aluminum demand.
Price Forecast Raised but Low Conviction on Pace of Gains Citigroup has raised its 0-3 month aluminum price target from $2,950/ton to $3,400/ton. Under its base case scenario, it forecasts an average price of $3,100/ton for Q1 2026 (50% probability), up from a previous forecast of $2,900/ton, with a bull case scenario of $3,500/ton. The 6-12 month anchor price is set at $3,300/ton, reflecting a constructive backdrop while acknowledging the potential for more volatility in the near term.
The report emphasizes that this adjustment reflects investors pricing the structural narrative into the spot market earlier, but Citigroup maintains low conviction regarding the speed and path dependency of the increase. Several short-term physical indicators in China still lag behind price momentum, which could catalyze tactical corrections. For consumers with long-term exposure, such pullbacks should be viewed as hedging opportunities.
Citigroup points out that speculative positioning has clearly anticipated the structural bull market narrative ahead of time, but the evolving physical fundamentals should be able to support this trend. The market enters 2026 facing slow easing of supply constraints, risks associated with project ramp-ups, and a situation where the ongoing energy transition demand theme continues to tighten inventory coverage.
Supply-Demand Dynamics Shift Towards Structural Deficit Citigroup states that although current prices are driven by financial demand, the fundamentals provide underlying support. In 2026, the market will face slowly easing supply constraints, risks associated with project expansions, and inventory reductions driven by the energy transition.
2026: A slight structural deficit of 61,000 tons is projected. 2027: The deficit is forecast to widen to 847,000 tons.
The financial nature of the current rally implies higher volatility, and a price vacuum could emerge if data underperforms or policy signals weaken. Nonetheless, Citigroup believes the fundamental support for the medium-term bullish narrative remains solid, reinforced further by recent policy and trade signals.
Aluminum for Copper: A New Growth Area in Home Appliances Citigroup states that the high premium of copper over aluminum is accelerating the substitution process in China's home appliance industry. In December 2025, Chinese home appliance manufacturers jointly released an "aluminum for copper" standard and signed a self-regulation pact, particularly for applications in air conditioner heat exchangers.
Simulations based on two different penetration rate scenarios:
Conservative Scenario: Additional aluminum demand of approximately 44,000 tons in Year 1, increasing to about 228,000 tons by Year 3. Accelerated Scenario: Additional aluminum demand could approach 663,000 tons by Year 3, simultaneously displacing over 1 million tons of copper demand.
Although the pace of adoption and technical pathways for aluminum substituting copper in air conditioning applications remain uncertain, policy drivers and cost pressures have made it an incremental factor that cannot be ignored.
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