Fitch solutions macro research says there are likely to be many shortages in the global aluminum market in the next few years as strong demand growth driven by the construction and automotive industries outpaces production growth.

By 2026, the supply of global primary aluminum market will be basically insufficient, as the growth of demand will exceed the increase of production. The company expects the market to shift to oversupply from 2026.

The outlook for global aluminum demand will benefit from robust growth in construction in major countries, as well as the growing role of automobiles as alternatives to light steel.

Fitch predicts that from 2019 to 2023, the global aluminum market will be in shortage or almost in equilibrium, and the aluminum inventory sales ratio will steadily decrease from 10.5% to 4.7% in the same period.

Global aluminum production will continue to grow in the next few years, as higher prices will encourage producers to continue to increase production.

From 2019 to 2028, global aluminum production is expected to grow by an average of 2.7% year-on-year, slightly lower than the average growth rate of 5% in the previous 10 years.

In the short term, production is expected to grow by 3.4% this year. That's because the company expects production to recover this year after last year's supply disruption, from the shutdown of Norway's Norsk Hydro's alunorte refinery in Brazil to a tariff related supply disruption at Alcoa.

As of July, supply disruptions in Canada and Brazil have been resolved, and output growth is expected to accelerate significantly in the second half of this year.

China's aluminum production growth is expected to slow down in the next few years as government driven integration and stricter environmental regulation will shut down more cost-effective and less efficient capacity.

However, in the next few years, absolute output will not decline completely, and China's aluminum production is expected to rise from 34.1 million tons this year to 40.8 million tons in 2028, with an average annual growth rate of 2.1% and an average annual growth rate of 11.7% in the past decade.

Nevertheless, China will continue to be a driving force in global aluminum production, accounting for more than half of global aluminum production in the next few years.

In terms of demand, the global aluminum market will remain stable in the next few years, driven by steady growth in Asian demand and the growing use of aluminum in industries such as automobiles and aerospace, Fitch said.

However, with China's economic growth slowing down, metal demand will also decline, and global demand growth will gradually slow down. It is estimated that by 2028, aluminum consumption will increase from 62.9 million tons this year to 78.6 million tons in 2028, with an average annual growth of 2.8%.

In the next few years, India will become a significant growth market for aluminum consumption. It is predicted that by 2028, India's aluminum consumption will increase from 2.6 million tons this year to 10.3 million tons, an average year-on-year increase of 15.8%, surpassing all other major consumer countries.

In more regulated automotive markets such as the United States, the European Union and Japan, aluminum integration will be strengthened, while developing countries will provide further growth opportunities.

Fitch said that although the trend is expected to continue in the long term, the rise in aluminum prices will bring resistance to aluminum integration in the automotive industry in the short term as automakers want to reduce costs.