Chinese aluminium producers are expanding overseas, a move that could tip the global market for the metal into surplus, even as Beijing increases its scrutiny of such investments, according to a Reuters review of company disclosures and government filings (Reuters, October 28, 2026). The review found that at least 15 million metric tons a year of primary aluminium smelting capacity is planned or has been announced by Chinese investors across Southeast Asia, the Middle East, Central Asia and Africa. About 2.85 million tons a year of that capacity is ramping up or under construction, equal to 3.8% of current global annual capacity of 73.78 million tons.
Morgan Stanley forecast in July that the new near-term smelter projects, together with recovering Middle East output, will shift the global aluminium market from a 1.1 million-ton deficit this year to an 830,000-ton surplus next year and a 1.8-million-ton surplus in 2028. The bank has cut its average price forecast to $2,850 a ton for 2027 and $2,800 for 2028, and expects aluminium to average $3,150 a ton in the second half of 2026. Benchmark three-month aluminium on the London Metal Exchange (LME) was at $3,097.50 a ton as of 0300 GMT on Wednesday, according to Reuters.
The push abroad is driven by domestic constraints. China's smelting capacity is capped at 45 million tons a year under a policy introduced in 2017 to curb overcapacity and pollution. Rachel Zhang, head of China materials research at Morgan Stanley, said the overseas expansion comes down to economics: “Most of these companies are privately owned and profit-driven.
If a project clearly does not make money, why would they invest in it?” Andrew Denton, research director at AME Group, said Chinese metal demand for manufacturing and electric vehicles above the domestic cap, along with expectations of consumption growth up to 20 years ahead, underpins the strategy. Indonesia has emerged as a major destination. Morgan Stanley expects the country to add 866,000 tons of annual smelting capacity in 2026 and another 1.2 million to 1.3 million tons in 2027.
Projects include Shandong Nanshan Aluminium's 250,000-ton-a-year facility on Bintan island, which is under construction; a facility of 600,000 tons a year being commissioned at Morowali Industrial Park by Xinfa Group and Tsingshan Holding Group; and an 800,000-ton-a-year facility at Weda Bay in North Maluku province, which Tsingshan is developing. Chinese projects in Kazakhstan and Saudi Arabia would together add around 4 million tons a year. In Saudi Arabia, Red Sea Aluminium, backed by Shandong Innovation Group, is building a 500,000-ton-a-year smelter in Yanbu targeting production in 2027.
In Kazakhstan, Xinfa is pursuing a 2.4-million-ton-a-year smelter in Pavlodar. Morgan Stanley expects around 2.1 million tons of new annual capacity globally in 2027 and 2.2 million tons in 2028. Beijing's oversight could determine how much of this capacity is built.
Under new outbound investment rules that took effect in July, overseas aluminium deals face stricter regulatory review, according to two sources briefed by some of the Chinese companies moving abroad. The rules allow authorities to review overseas investments on national security grounds and to order companies to halt projects or divest assets. In October, Fan Shunke, deputy party secretary of the state-backed China Nonferrous Metals Industry Association, said a huge expansion overseas was neither desirable nor feasible.
Alan Clark, founder of aluminium consultancy CM Group, said large integrated projects are still likely to proceed, though with more delays, while the new rules will make it harder for smaller stand-alone smelters. Clark estimates that only 9 million to 10 million tons of the 15 million tons identified by Reuters will eventually be built, with about half of that in Indonesia. Access to overseas power also remains an obstacle for new plants, and Reuters notes that new supply could weigh on prices and put projects further down the pipeline at risk.
Source: Reuters, reporting by Dylan Duan and Lewis Jackson in Shanghai and Beijing. Forecasts attributed to Morgan Stanley; analysis attributed to AME Group and CM Group as cited in the original report.
Source: reuters.com