The aluminum market is experiencing its most acute supply crisis in decades. The closure of the Strait of Hormuz due to the Iran conflict has severely limited shipments of aluminum and raw materials from Gulf producers, who account for approximately 10 percent of global primary aluminum supply.
The physical shortage has pushed the LME cash-to-3-month backwardation to approximately $97 per tonne, the highest in nearly two decades. This backwardation structure signals extreme near-term tightness, with consumers paying substantial premiums for prompt delivery over deferred positions.
Available LME aluminum stocks have plummeted 39 percent since late February to a one-year low. The physical shortage has driven regional premiums in Europe and the U.S. to record levels, prompting Canadian producers to redirect shipments toward European markets where premiums are most attractive.
The cash price peaked at $3,768/t on May 14 before settling near $3,591/t. Analysts warn that until the Hormuz situation resolves or alternative supply routes are established, the backwardation is likely to persist, keeping spot prices elevated and physical premiums at historic levels.