Aluminium's calm belies lingering supply-chain stress
AA•Iranian attacks on Gulf smelters and disruption to the Strait of Hormuz knocked out almost 3 million metric tons of aluminium capacity, but prices have returned to just above $3,000 per ton. Physical premiums remain elevated and LME registered stocks have fallen to 238,625 tons, their lowest level this century.
1. Supply gaps filled
Gulf primary aluminium production was 2.6 million tons below pre-hostility levels in August, despite repairs and ramp-ups at damaged facilities. Higher exports from China and rising output from new smelters in Indonesia have helped offset the shortfall: Chinese exports of alloy doubled year on year to 349,000 tons in January-August, while Indonesia exported a record 114,000 tons of primary metal in July.
2. Premiums stay elevated
Japanese buyers agreed to a fourth-quarter premium of $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 was $559 per ton, double its end-February level; the US Midwest premium was $2,312 per ton, reflecting, in part, 50% import tariffs.
3. Stocks at multi-year lows
LME registered inventory stood at 238,625 tons, its lowest level this century, with most remaining stocks consisting of Russian metal. Off-warrant inventory fell to 73,509 tons, its lowest since reporting began in 2020. The cash price has returned to a small premium over three-month metal, and the article says tightness is likely to persist while physical premiums remain high.
