Edward Meir: Aluminum outlook for 2026

Prices traded at just under $3,000/ton on the last day of 2025—a 3 1/2 year peak—while the low for the year was reached on April 9 at $2,300, just hours before President Trump announced his tariff about-face later that day.

In fact, tariffs were very much front and center in determining aluminum prices and premiums. They will play a critical role this year as well. At the start of the year, Trump put his tariff program in motion by imposing 25% tariffs on Canada and Mexico on Jan. 20. The tariffs would eventually rise to 50%, resulting in Midwest premiums more than doubling from the low $0.40 level in March to almost $1/pound by year end.

European premiums also pushed higher, albeit for entirely different reasons. In October, South32 said, “Negotiations to secure sufficient and affordable electricity for Mozal Aluminium have not progressed to provide confidence the smelter will have access to the required electricity supply when the current agreement expires in March 2026.”

By December, it was announced the smelter would be on care and maintenance going forward. The supply loss in Europe was further aggravated after Century announced a partial curtailment of its Nordural Grundartangi smelter in Iceland where roughly 215,000 tons of low-emission material (roughly 2/3 of the smelter’s output) will be sidelined for at least six months. Markets are also bracing for imminent announcements regarding CBAM provisions that will likely add an additional layer of costs for European consumers.

CU/AL substitution

In light of soaring copper prices, we did hear talk of substitution away from copper and into aluminum for certain products. The rule of thumb is the copper-to-aluminum price ratio has to be around 4x-5x or higher before substitution becomes viable. That ratio has averaged 3.5 times over the last decade and is around 4.1 right now, but the ratio is only one of the issues.

Working against aluminum is the fact that aluminum cables must be around 1.6 times thicker than copper to achieve the same conductivity. Aluminum also brings with it additional weight issues that complicate installation, while copper remains more resistant to corrosion in extreme or saline environments.

Last month, China’s Gree Electric Appliances said it would not replace copper with aluminum in its air-conditioning units despite an improving aluminum/copper price ratio. The company’s chairwoman said she is not yet satisfied aluminum has the same technical benefits as copper does and is holding off for now. Other Chinese air-conditioner manufacturers have made the change and are pricing their AC units about 20% cheaper than copper-based ones.

However, even aluminum could get substituted by steel. Steelmaker Cleveland-Cliffs is working on a trial steel product it says can displace aluminum in certain OEM stamping equipment and noted its material “can effectively replace aluminum in critical automotive applications without the need for costly retooling.”

Cleveland-Cliffs also said it “has received inquiries from other clients for programs that will replace aluminum with Cliffs steel.” (Cliffs could be referring to Tesla here, as CRU noted in a recent publication that Tesla’s Model 3 and Model Y are using less aluminum than previous models, adopting a high-steel, mixed-material instead).

Forward outlook

Aluminum did not have the explosive price move that copper and tin had in 2025, and we think that will be the case this year. But the premium story is perhaps more consequential than flat prices given that, at least here in the US, Midwest now constitutes a whopping 70% of the outright LME cash price.

Where do we see premiums going?

Early in 2025, we thought the Trump administration’s tariff campaign was part of a grand negotiating trade strategy to ultimately negotiate new trade agreements with America’s main trading partners. We thought the steep aluminum and steel tariffs were in effect an opening salvo that would ultimately lead to yet another version of NAFTA and would tilt the deal further in the US’ favor.

One year later, our thinking has changed. We now think the Trump administration does not have any interest in pursuing new or improved trade deals.

For one thing, not only would these negotiations be complicated and protracted, but they would also involve the US ultimately reducing tariffs. This is something the administration is loath to do as it will negate two key components of its trade program: First, it would lessen the incentive for more US manufacturing to reshore. Secondly, it would mean less revenue coming in. (As things currently stand, US imports have decreased significantly, straining the tariff windfall.)

It looks like premiums will stay high for much of this year as tariffs will remain elevated while domestic supply simply cannot accommodate US consumption needs. As a result, Canadian metal will have to flow south. In fact, after several months of declines, we did see the first import uptick occur in September.

Domestically, Century’s restart (50,000 tons at Mt. Holly), is fairly modest and will not move the supply needle much. Moreover, the company is only conducting a strategic review of restarting 250,000 tons of output at its Hawesville facility and has not committed to a restart here. A new billion-dollar smelter being proposed in Oklahoma by EGA is contingent on securing a competitive long-term power supply agreement (something that Century will also have to do).

Finally, Alcoa’s CEO Bill Oplinger said last year he does not see tariffs as being justification enough to restart production as power remains the more critical variable. Here, US smelters will be competing with data centers that are more numerous, better capitalized and have a much shorter build time. More importantly, they can easily outbid any smelter. Microsoft, for example, is reportedly willing to pay $115/MWh for its electricity, about triple what aluminum smelters can afford.

The other big issue facing the aluminum market is the looming US Supreme Court decision on tariffs. We believe the Court will likely rule against the Trump tariffs, but the steel and aluminum tariffs will not be impacted as they are based on separate Section 232 rulings—yet another reason why Midwest premiums should remain firm.

Will the Chinese production cap be bullish?

Chinese production is very close to the 45 million ton production cap the government theoretically wants to keep in place. Some view this cap as being bullish for 2026 prices given it should restrain supply further. We do not see the authorities enforcing this cap aggressively. For one thing, adopting a hard line on the cap could raise domestic aluminum prices and perhaps encourage even more capacity to come online, something the authorities don’t want to see.

Moreover, there is no need to enforce the cap as the Chinese market is well supplied by both cheaper Russian units and an expanding Indonesian aluminum production base and so the cap might settle at just above 45 million tons on its own without any government effort.

Demand

On the demand side, we see global demand this year remaining fairly decent (up by about 3.5% Y/Y), helped in part by possibly stronger manufacturing activity, a pickup in US housing and an ongoing need for metal by auto companies. (The Novellus fires at its Oswego plant in New York certainly did not help supply here.)

Furthermore, more aluminum is making its way into the AI/data center space. In the US, there are roughly 5,400 data centers—accounting for over 28% of the global total and have doubled from just a year ago. The centers are expected to account for nearly half of all US electricity demand growth through 2030.

Although aluminum is not used in data centers in the same amount as copper is, we nevertheless should see some uptake in aluminum generated by the construction of hyperscale campuses and grid and solar/wind parts. In fact, CRU research notes cleantech destinations for aluminum (EVs, power grids, clean energy and wind turbines) are projected to consume as much aluminum as traditional construction.

We see aluminum in a 300,000 ton deficit in 2025 and see a 400,000 ton shortfall going into 2026. This should keep overall inventories low and provide yet another reason for firmer prices—and premiums.