Indonesia's rising aluminum output threatens the $3,000 price outlook for 2026

JPMorgan expects aluminum price may get close to USD 3,000 per tonne in early 2026, helped by stronger copper prices and a market that, for now, looks reasonably tight. But several analysts say the outlook becomes much less straightforward once Indonesia's new supply starts landing, and that may happen faster than the market is prepared for.

For years, Indonesia has talked about becoming a major aluminum producer. What's different now is that many of the long-promised projects are actually close to starting up. Smelters, refineries and upstream investments are advancing at the same time, creating a level of momentum that could reshape the regional market.

Two of the projects - backed by Bintan Alumina Indonesia and Borneo Alumina Indonesia - are pushing the country's alumina output toward a possible 7 million tonnes a year. On the metal side, Indonesia's primary aluminum production may almost double in 2026, rising from around 815,000 tonnes to about 1.6 million tonnes, with several China-supported potlines expected to switch on in the second half of the year. That timing is important: the extra tonnes arriving later in 2026 are likely to put a lid on the price rally many traders are eyeing for Q1. Some forecasts see the year ending closer to USD 2,650 per tonne, with an annual average near USD 2,800.

The state-owned mining group MIND ID is a central part of this shift. Its new smelter in Mempawah - roughly 600,000 tonnes per year - is one of the biggest industrial builds underway in West Kalimantan. When paired with INALUM's existing operations, Indonesia aims to reach roughly 900,000 tonnes of state-linked smelting capacity by 2029.

Private developers are just as active. Adaro Minerals is constructing a renewable-powered smelter in the vast North Kalimantan Green Industrial Park. The first metal is targeted for late 2025, starting at about 500,000 tonnes and later ramping toward 1.5 million tonnes. Adaro's aluminum arm, PT Alamtri Indo Aluminum, recently put in around USD 300 million to keep work moving.

The upstream picture is shifting, too. Indonesia plans to bring three alumina refineries online in 2025, followed by three more by 2027, which would multiply the country's processing capacity several times over. MIND ID's SGAR Phase I refinery, currently running at 1 million tonnes, consumes more than 3 million tonnes of bauxite each year. A second phase will add another 1–2 million tonnes, supported by reserves such as the Mempawah deposit.

All this investment ties back to Indonesia's long-term industrial plan. Demand for aluminum inside the country is expected to surge - possibly sixfold over the next 30 years - as electric vehicles, solar manufacturing and other downstream sectors take shape. Reducing reliance on imported materials has become a key theme for policymakers.

With so much capacity heading toward completion, Indonesia is stepping into a far more influential role in the global aluminum market. Prices may edge higher going into 2026, but the country's rapid build-out means the second half of the year could look very different from the first.

Note: This article is published in accordance with an article exchange agreement between Mysteel and AL Circle.