The global aluminium market is likely to experience a number of deficits over the coming years as solid demand growth, driven by the construction and automotive sectors, outpaces production growth, says Fitch Solutions Macro Research.

Fitch expects the global primary aluminium market to remain largely undersupplied until 2026, as modest demand growth outpaces that of production. From 2026 onwards, it expects the market to shift into oversupply.

The global aluminium demand outlook is set to benefit from solid construction industry growth in key countries and growing roles in automotive as a lightweight substitute for steel.

Fitch forecasts the global aluminium market to witness deficits or be almost in balance from 2019 to 2023, with the aluminium stock-to-use ratio to decline steadily from 10.5% to 4.7% over the same period.

Global aluminium production is set to continue to rise over the coming years as higher prices incentivise producers to continue increasing output.

Fitch forecasts the global production growth rate to average 2.7% year-on-year over 2019 to 2028, representing a slight slowdown compared with the average growth rate of 5% over the previous ten-year period.

In the shorter term, Fitch expects output to accelerate by 3.4% this year. This is owing to its expectation for a recovery in output this year following supply disruptions hindering output last year, ranging from stoppages at Norsk Hydro’s Alunorte refinery, in Brazil, to US tariff-related disruptions at Alcoa.

Disruptions in Canada and Brazil have, as of July, been resolved and, as such, Fitch expects output growth to pick up considerably for the second half of this year.

China’s aluminium production growth is expected to slow down over the coming years, as the government’s push for consolidation and stricter environmental regulations take higher-cost and less efficient capacity off line.  

However, there will not be an outright decline in absolute output over the coming years, and Fitch expects the country’s aluminium output to edge higher, from 34.1-million tonnes this year to 40.8-million tonnes by 2028, averaging 2.1% yearly growth, compared with an average yearly growth rate of 11.7% over the previous ten-year period.

Nonetheless, China will remain the driving force behind global aluminium production, accounting for over half of total output over the coming years.

In terms of demand, the global aluminium picture will be stable over the coming years, driven by steady demand growth in Asia and the growing application of aluminium in industries such as automotive and aerospace, says Fitch.

However, global demand growth will gradually slow compared with previous years as Chinese economic growth and, therefore demand for metals, ticks lower.

Fitch forecasts aluminium consumption to increase from 62.9-million tonnes this year to 78.6-million tonnes by 2028, averaging 2.8% yearly growth.

India is set to be the standout growth market for aluminium consumption in the coming years. Long term-growth prospects in the country’s construction industry are supported by its sizeable infrastructure deficit and the government’s favourable polices towards driving public and private investment in the sectors.

Fitch forecasts India’s aluminium consumption to increase from 2.6-million tonnes this year to 10.3-million tonnes by 2028, amounting to an average growth rate of 15.8% year-on-year, outperforming all other major consumer countries.

Aluminium integration is set to rise in more regulated automotive markets such as the US, the European Union and Japan, while developing markets will present further growth opportunities.

Fitch indicates that while it expects this trend to continue over the long term, rising aluminium prices will present near-term headwinds to the integration of the metal in the automotive sector as car makers look to keep costs down.