Aluminum prices reached a four year high on Tuesday (May 26) as production quotas and logistical bottlenecks converged to drain global inventories.
Three month aluminum on the London Metal Exchange (LME) peaked at US$3,707.50 per metric ton (MT) — its highest trading level since March 24, 2022 — before settling at US$3,680.
The physical market is exhibiting signs of extreme near-term tightness.
The premium for the LME cash contract over the three month benchmark widened to US$71 per MT last week. This indicates buyers are willing to pay a significant premium to secure immediate physical delivery.
The primary driver of this physical shortage is the effective closure of the Strait of Hormuz since late February, which has stranded exports from major Gulf producers.
Analysts characterized the regional conflict as the largest aluminum supply shock in at least 50 years, estimating that the disruption has accelerated global inventory drawdowns by roughly 3 million MT this year from already historically low levels.
Chinese smelters initially capitalized on the global shortage, ramping up capacity to push the nation’s daily aluminum output to a record 129,000 MT last month. However, Beijing is now intervening to curtail this overproduction.
Following a May 13 directive from the Ministry of Industry and Information Technology, Chinese authorities initiated a nationwide inspection of energy use and emissions across heavy industries, including steel and oil refining.
As a direct result, at least one smelter in Baise, Guangxi province, has already cut its output of molten aluminum.
Simultaneously, smelters are facing severe cost pressures upstream. September alumina futures on the Shanghai Futures Exchange rose 5 percent on Tuesday to their highest level since early May.
The cost of alumina, the precursor to refined aluminum, is spiking due to impending policy shifts in Guinea. The West African nation, which is the world’s top producer of unrefined bauxite, plans to introduce export quotas for mining companies in June to offset climbing shipping costs that have squeezed state revenues.
Furthermore, the Eurasian Economic Commission (EEC) announced that it has extended anti-dumping duties on aluminum tape originating from China and Azerbaijan through May 24, 2031.
The tariffs maintain a 13.14 percent levy on Chinese imports and a 16.18 percent levy on Azerbaijani material.
“The decision was adopted following a repeated anti-dumping investigation initiated by the Department for Internal Market Defence on June 30, 2025 due to the applicable measure expiration based on a complaint from goods manufacturers from the Eurasian Economic Union countries,” Andrey Slepnev, the EEC’s minister in charge of trade, said in a statement.
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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
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