Looking ahead to 2026, CITIC SEC anticipates that aluminum consumption for photovoltaics will accelerate its decline, while the power grid and automotive sectors will maintain their high growth momentum. Furthermore, growth in aluminum usage for energy storage and the substitution of aluminum for copper in air conditioners is expected to pick up speed, thereby supporting the sustained growth potential of primary aluminum demand. Concurrently, CITIC SEC believes that even with the commissioning of new production capacity in Indonesia, the trend of a decelerating supply growth rate for the industry remains intact, with signs of increasing supply-side disruptions gradually emerging. CITIC SEC forecasts that the average aluminum price for 2026 will reach 23,000 yuan per ton and maintains a positive outlook on the aluminum sector's prospects for simultaneous improvement in both profitability and valuation.
In 2025, China's primary aluminum demand has demonstrated unexpectedly strong resilience. In a previous report, the forecast for China's primary aluminum consumption growth in 2025 was 1.0%, primarily due to concerns over declining real estate completion area and weakening exports. The current projection has been revised upwards, expecting China's primary aluminum consumption growth to reach 2.6% in 2025, exceeding initial annual expectations. This upward revision is mainly attributed to stronger-than-expected growth in automotive aluminum usage and a less severe decline than anticipated in construction aluminum demand. Although photovoltaic installations and power grid investment fell short of expectations, a significant surge in energy storage demand beyond forecasts has contributed to demand showing higher-than-market-expected resilience since 2024.
Emerging sectors are expected to underpin the long-term growth momentum for primary aluminum demand. 1) Aluminum for Energy Storage: As global energy storage enters a period of accelerated development, the incremental aluminum demand for energy storage batteries is forecast to be 470,000/410,000 tons for 2026-2027. 2) Aluminum Replacing Copper in Air Conditioners: Driven by policy support and the signing of industry self-discipline conventions, the substitution of aluminum for copper is expected to accelerate. The incremental aluminum demand for air conditioners is projected to be 160,000/150,000 tons for 2026-2027. 3) Aluminum for Power Grid: Investment growth in China's power grid is anticipated to pick up pace, with the incremental aluminum demand forecast at 460,000/380,000 tons for 2026-2027. 4) Aluminum for Automotive: Continued growth in production and sales of automobiles and new energy vehicles is expected, with projected incremental aluminum demand of 330,000/530,000 tons for 2026-2027. 5) Aluminum for Photovoltaics: The incremental aluminum demand in the photovoltaic sector is forecast to be -650,000/+100,000 tons for 2026-2027.
In 2026, aluminum consumption for photovoltaics is likely to decline at a faster rate, while the automotive industry is expected to maintain its high growth momentum. Power grid investment growth is anticipated to accelerate, and consumption growth from energy storage and aluminum-for-copper substitution in air conditioners is expected to speed up, collectively supporting sustained demand growth momentum. For 2027, China's photovoltaic installations are projected to stabilize, while automotive and power grid investment are expected to continue their growth trajectory. Coupled with the anticipation of persistently strong demand growth from energy storage and air conditioners, the overall demand growth rate is expected to rise again. Consequently, the incremental aluminum demand from China's emerging sectors is forecast to be 1.16/0.83/1.78 million tons for 2025-2027, corresponding to domestic demand growth rates of 2.6%/1.8%/3.8% and global demand growth rates of 2.9%/2.2%/3.2%, indicating that the potential for sustained growth remains promising.
Global aluminum supply expectations have been revised slightly upwards, but the growth rate remains low. With the commissioning of new primary aluminum projects in Indonesia, the forecast for the global primary aluminum production increase for 2025-2030 has been adjusted to 1.69/1.46/1.86/1.95/1.70/1.09 million tons, corresponding to growth rates of 2.3%/2.0%/2.5%/2.5%/2.1%/1.3%. The average growth rate for 2025-2030 is projected to be 2.1%, significantly lower than the 2.7% recorded from 2020-2024. Simultaneously, risks related to community policies, accident potential, and unique power supply challenges for aluminum production have become more pronounced, suggesting a trend towards increased supply-side disruptions.
The 2026 aluminum price forecast has been raised to 23,000 yuan per ton, reflecting a bullish stance on the sector's simultaneous improvement in profitability and valuation. Based on the supply and demand projections outlined above, China's primary aluminum market balance is forecast to be -40,000/-290,000/-820,000 tons for 2025-2027, while the global balance is projected at -190,000/-400,000/-950,000 tons, indicating a widening supply deficit. Considering that industry supply and demand dynamics are more favorable than previously anticipated, the forecast for the 2026 average aluminum price has been upwardly revised to 23,000 yuan per ton. The current copper-to-aluminum price ratio is at a historical high. Furthermore, the projected 2026 price-to-earnings ratios for China's copper and aluminum sectors are 12-14X and 8-10X, respectively, suggesting strong potential for aluminum prices and aluminum sector valuations to catch up. A positive outlook is maintained on the aluminum sector's prospects for simultaneous improvement in corporate profits and sector valuations.
Risk factors include potential downside risks to primary aluminum downstream demand growth, risks of global primary/alumina project construction and commissioning exceeding expectations, risks associated with rising global energy costs, risks of supply disruptions for raw materials at the mining stage, risks of price increases for other raw and auxiliary materials, and risks of intensifying global trade disputes.
Regarding investment strategy, looking ahead to 2026, the expectation is for accelerated decline in photovoltaic aluminum usage, sustained high growth momentum in the power grid and automotive sectors, and potential acceleration in consumption growth from energy storage and air conditioners, which will support the long-term demand growth momentum for primary aluminum. Simultaneously, the view is that even with new Indonesian capacity coming online, the trend of decelerating industry supply growth remains, with signs of increasing disruptions gradually becoming apparent. The forecast for the 2026 aluminum price is 23,000 yuan per ton, maintaining a positive outlook on the aluminum sector's prospects for simultaneous improvement in profitability and valuation.
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