In a significant shift for the metals market, Goldman Sachs has downgraded its aluminum price forecast for the remainder of 2025, citing deteriorating demand fundamentals and an emerging global surplus. The bank now expects aluminum to average $2,000 per metric ton in Q3 2025, a substantial drop from its prior forecast of $2,650/mt.

This revision is the latest signal that the industrial metals sector—particularly aluminum, a key input in construction, packaging, and automotive manufacturing—is entering a cooling phase after years of post-pandemic volatility and speculative tailwinds.

What’s Driving the Revision?

Goldman’s forecast change hinges on three main factors:

• Global Supply Surplus: The bank projects a 580,000-ton aluminum surplus in 2025, a dramatic turnaround from its previous outlook of a 76,000-ton deficit. Higher-than-expected output from China and the Middle East is contributing to the supply glut.

• Slower Demand Growth: Global demand is now expected to grow just 1.1% in 2025 and 2.3% in 2026, revised down from previous estimates of 2.6% and 2.4%, respectively. Much of this slowdown is attributed to sluggish economic activity in major industrial hubs and a softer-than-expected recovery in sectors like construction and automotive.

• Trade Policy Uncertainty: The recent reintroduction of 25% U.S. tariffs on aluminum imports by President Trump is reshaping trade flows. While domestic producers may benefit short-term, retaliatory measures and broader trade friction could suppress global aluminum trade and demand.

Short-Term Impact

The revised outlook comes at a precarious time. For producers and traders, a drop to $2,000/mt—levels not seen since late 2023—could pressure margins and force supply cuts or production slowdowns, especially among higher-cost smelters.

Companies heavily reliant on aluminum, such as beverage manufacturers, aerospace firms, and carmakers, may find some temporary relief in lower input costs. However, that benefit could be offset by the broader economic drag implied by the demand slowdown.

Market Reactions

Aluminum futures have already started to respond. Prices on the London Metal Exchange (LME) slid nearly 4% in the days following Goldman’s report, and investor sentiment has turned cautious. Mining and metal equities with exposure to aluminum, including Alcoa and Norsk Hydro, saw modest declines, while some manufacturers saw modest gains on anticipated cost savings.

Medium- to Long-Term Rebound?

Despite the bearish near-term outlook, Goldman Sachs remains optimistic over the long run. The bank forecasts prices to climb back to $2,720/mt by December 2026 and reach $2,800/mt in 2027. This recovery is expected to be driven by:

• A projected deficit of 722,000 tons by 2027, as supply tightens and demand from renewable energy, electric vehicles, and infrastructure investment rebounds.

• Structural underinvestment in new aluminum production capacity.

• Possible easing of trade restrictions under future administrations or global agreements.

Key Questions Going Forward

• Will Chinese output remain elevated? Much of the surplus hinges on China’s production pace. A policy shift or environmental crackdown could reverse this.

• How will tariffs play out politically? Trade policy changes could alter the competitive landscape for U.S. manufacturers and global suppliers alike.

• Can demand bounce back faster than expected? A surprise uptick in construction activity or EV production could tighten the market sooner than forecast.

Takeaway

Goldman’s forecast revision signals a turning point for the aluminum market—one where oversupply and macroeconomic weakness could outweigh the bullish narratives of the past few years. But with long-term structural forces still in play, this downturn may prove temporary for well-positioned players.

For manufacturers, hedgers, and traders, the months ahead will be defined by agility: managing short-term volatility while preparing for an eventual recovery.

How Pillar Helps

At Pillar, we help aluminum buyers and processors navigate these swings with confidence. Our software automatically tracks your exposure, structures the right hedges, and executes trades across exchanges—so you're not left guessing when prices collapse or surge.

Whether you're worried about the $2,000/mt floor or trying to lock in future upside, Pillar gives you the tools to protect margins, stabilize costs, and make smarter risk decisions—without hiring a full trading desk.

In a market this unpredictable, hedging isn’t optional. It’s strategic.