Why I Was Bullish Aluminium Into 2026

Executive Summary#

Investment View#

Positioning#

Market Background#

Aluminium was balancing weak cyclical sentiment against a supply system with limited flexibility.

China produced the majority of global primary aluminium and was approaching an administrative ceiling near 45 million tonnes per year. Outside China, high power costs and long restart timelines limited the ability of idled smelters to respond quickly.

Visible LME stocks were low relative to earlier periods, while investment funds had built substantial long exposure. The setup combined physical tightness with the risk of crowded positioning.

Investment Thesis#

1. China’s Output Ceiling Reduced Swing Capacity#

The 45 million-tonne ceiling was the centre of the thesis. Chinese annualised output was already near 44 million tonnes, leaving less room for the country to respond to higher prices as the global swing producer.

The ceiling was not an absolute physical limit. Capacity swaps, efficiency improvements and policy exemptions could alter effective production. It nevertheless reduced expected supply elasticity.

2. Visible Inventories Were Low#

The original work recorded LME inventories near 543,725 tonnes, below early-2025 levels and historical norms.

Low exchange stocks increased sensitivity to disruptions and nearby demand. They did not prove that total global stocks were exhausted: metal can be held off warrant, in producer systems or in regional warehouses. The defensible conclusion was that immediately deliverable LME availability was limited.

3. Western Supply Could Not Restart Quickly#

Primary aluminium smelting is power-intensive. High electricity costs, closure risk and long potline restart periods constrained short-term supply in Europe, the United States and Australia.

The original presentation described data centres as directly competing with smelters for power. That can occur in particular grids, but the broad claim was not adequately quantified. The stronger point was that power availability and long-term electricity contracts were increasingly important constraints on smelter economics.

4. Infrastructure Demand Provided Support#

Grid expansion, electric vehicles, solar installations and lightweight transport increased aluminium intensity. Copper-to-aluminium substitution added potential demand where conductivity, weight and cost allowed.

This demand was structural but not immune to the cycle. Construction and manufacturing remained large end markets, so a global slowdown could overwhelm energy-transition growth in the short run.

5. Positioning Could Accelerate the Move#

Large fund-long positions increased the probability of a breakout if physical data remained supportive. They also increased liquidation risk if inventories rose or macro conditions deteriorated.

The thesis therefore required both physical confirmation and disciplined risk management.

Catalysts#

Principal Risks#

Outcome and Reflection#

The 5 February 2026 update recorded LME three-month aluminium at approximately $3,050–3,120/t. That placed the market at or above the original $2,950–3,050 target approximately ten weeks after publication.

Research Methodology#

The original reference price, inventory figure and target come from the 27 November 2025 Queen’s Tower Capital presentation. The target outcome is assessed against the contemporaneous 5 February 2026 follow-up presentation. Current LME data are used only for later context.

Sources#

• London Metal Exchange — LME Aluminium
• International Aluminium Institute — Primary Aluminium Production
• London Metal Exchange — Warehouse and Stock Reports