Aluminium's calm belies lingering supply-chain stress
XLB•Nearly 3 million metric tons of aluminium capacity has been knocked out in the Gulf, but prices have returned to just above $3,000 per ton. Physical premiums remain elevated and LME inventories are at multi-year lows despite rising output and exports from China and Indonesia.
1. Output gap persists
Gulf primary aluminium production fell by an annualized 2.8 million tons between February and May after smelter shutdowns, damage and logistics problems. Production has since begun recovering, but the August run-rate remained 2.6 million tons below pre-hostility levels. China increased exports of alloy and semi-finished products, while Indonesia’s primary metal exports reached a monthly record of 114,000 tons in July.
2. Premiums remain high
Japan’s fourth-quarter delivery premium was set at $255 per ton over the LME cash price, down 35% from the previous quarter but above the $200 premium at the start of the Iran war. The European duty-paid premium stood at $559 per ton, double its end-February level. The US Midwest premium was $2,312 per ton, with the article attributing that level partly to 50% import tariffs.
3. Inventories at lows
LME registered aluminium stocks stood at 238,625 tons, the lowest level this century, and off-warrant stocks totaled 73,509 tons, their lowest since reporting began in 2020. Cash has returned to a small premium over three-month metal after a period of mild contango, and the article says tightness may persist while physical premiums remain high.
