LME aluminum inventories have drained to approximately 344,000 tonnes, down more than 30% since January, pushing the market into a deepening backwardation. Cash aluminum traded at a $60 per tonne premium over three-month futures on May 26, the widest backwardation this year, signaling acute spot tightness.
The supply squeeze comes from multiple directions. Guinea announced controls on bauxite exports starting June, tightening the raw-material pipeline. European energy-related curtailments have taken smelter capacity offline, while the Strait of Hormuz closure earlier in 2026 added an acute supply shock on top of already low inventories. IAI data shows Western aluminum production in freefall — Mozal in Mozambique faces closure while Iceland's Grundartangi has halved output.
On the demand side, post-pandemic growth in autos, construction, and packaging has kept consumption firm despite prices near four-year highs. The LME benchmark pushed to approximately $3,678/t, up 45% year-on-year. DiscoveryAlert's analysis attributes the rally to a confluence of supply disruptions: European energy costs, sanctions-related trade disruptions, and the Gulf smelter crisis have all converged to create a structural deficit.