LME Aluminium Price Back to February Levels: Hidden Supply Chain Tightness After Gulf Smelter Disruptions
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LME three-month aluminium prices have returned to just above USD 3,000 per tonne, matching levels seen in early February before Middle East military actions. This apparent price stability masks deep stress across the physical aluminium supply chain, triggered by missile strikes on Gulf smelters and ongoing shipping risks in the Strait of Hormuz.
Nearly 3 million tonnes of aluminium capacity went offline after the disruption. Eight months on, the benchmark market looks calm, supported by rising primary aluminium output from Indonesia and growing Chinese aluminium product exports filling the supply gap while Gulf smelters carry out repairs.
Gulf primary aluminium production is recovering gradually but remains well below pre-confusion output. August’s annualised run rate stood at 3.5 million tonnes, still 2.6 million tonnes short of earlier levels.
China’s 30% export duty caps direct primary aluminium shipments, yet alloy and semi-finished aluminium exports have surged. January–August aluminium alloy exports doubled year-on-year to 349,000 tonnes, while plate, sheet and strip shipments climbed to 4.46 million tonnes. Indonesia has also become a critical alternative supplier, hitting a monthly record of 114,000 tonnes of primary aluminium exports in July, with cargoes now flowing to Asia, Europe and the US.
Regional physical premiums reveal uneven market tightness. Asian premiums have eased from June peaks; Japanese buyers settled a Q4 premium at USD 255/tonne over LME cash. European premiums remain far higher at USD 559/tonne, and the US Midwest premium stands at USD 2,312/tonne, inflated by 50% US aluminium import tariffs.
LME registered aluminium inventories have dropped to 238,625 tonnes, the lowest this century. Most remaining stock is Russian metal, limiting access for Western buyers. Off-warrant LME stocks also fell to their 2020 reporting low of 73,509 tonnes. LME time-spreads have flipped back to a small cash premium over three-month metal, signalling near-term physical supply tightness.
The global aluminium market has absorbed massive production losses without sustained benchmark price spikes, thanks to new supply from Indonesia and China. Still, depleted exchange inventories, inflated physical premiums and tight nearby spreads prove the calm LME headline price does not mean the physical aluminium market has returned to normal.
