Summary

• Goldman Sachs increased its aluminum price forecast due to potential supply shortages from higher demand.
• The bank predicts average of $3,125 per ton this year and $3,750 per ton in next 12 months.
• Goldman Sachs is bullish on overall commodities market, expecting returns of over 40% this year.

Goldman Sachs Group Inc. has raised its price forecasts for aluminum, stating that higher demand in Europe and China could lead to supply shortages. The metal is expected to average $3,125 a ton this year in London, according to a note to clients by analysts Nicholas Snowdon and Aditi Rai. This is an increase from the current price of $2,595 and a raise from the bank's previous forecast of $2,563. The bank predicts that the metal will continue to rise to $3,750 a ton in the next 12 months. This metal is used to make everything from beer cans to plane parts.

The analysts pointed out that "with visible global inventories standing at just 1.4 million tons, down 900,000 tons from a year ago and now the lowest since 2002, the return of an aggregate deficit will quickly trigger scarcity concerns." They added that "set against a far more benign macro environment, with fading dollar headwinds and a slowing Fed hiking cycle, we expect upside price momentum to build progressively into spring."

Aluminum reached record highs soon after Russia's invasion of Ukraine last February. However, it has slumped as Europe's energy crisis and a slowing global economy led many smelters to curb production.

Goldman Sachs, like many other Wall Street banks, is bullish on commodities as a whole. The bank argues that a lack of investment in recent years has led to low supply buffers. It sees the asset class generating investors returns of more than 40% this year as China reopens and the global economy picks up in the second half of the year.