China's aluminum export machine is running at full throttle. May's 980,000-ton export figure shattered the previous record of 870,000 tons set in March 2026. On an annualized basis, China is exporting 11.8 million tons of aluminum products — equivalent to 16% of global consumption outside China. The export surge reflects domestic overcapacity: China produced 3.71 million tons of primary aluminum in May alone, while apparent domestic demand is absorbing roughly 3.4 million tons per month.
The impact on global premiums has been immediate and widespread. European duty-paid aluminum premiums, assessed by Fastmarkets, fell to $240-260/t this week, down from $280-300/t in April. The decline reflects not only increased Chinese semi-finished exports (sheet, extrusions) but also the restart of European smelting capacity. Trimet's Essen smelter in Germany and Alcoa's San Ciprian smelter in Spain have both ramped up output in 2026 after energy prices stabilized.
In Asia, Japanese Q3 premium negotiations are underway. Buyers are bidding $145-155/t versus the Q2 settlement of $175/t, citing ample supply and weak domestic demand. Japanese aluminum product shipments fell 3.2% in Q2, with construction and industrial machinery sectors particularly soft. South Korean premiums have also eased to $155-165/t.
The US market is not immune. The Midwest delivered premium slipped to $0.19-0.21/lb ($419-463/mt equivalent), pressured by higher Canadian imports and a strong US dollar making US markets attractive for offshore metal. The Section 232 tariff (10% on aluminum imports) provides a floor but does not prevent Chinese semi-finished products from entering through third-country processing routes in Mexico, Vietnam, and Turkey.
LME aluminum at $3,405/mt tells only part of the story. For physical buyers, the all-in delivered cost is LME + regional premium. When premiums compress by $30-40/t across all regions simultaneously, it represents a real improvement in procurement economics — roughly a 1% reduction in total delivered cost per $10/t of premium compression.
Physical aluminum premiums are falling across all three major regions simultaneously — a rare alignment that benefits buyers. European duty-paid at $240-260/t is down $40/t in two months. If your contracts allow premium negotiation or spot premium benchmarking, push for the lower end of current ranges. Japan Q3 negotiations at $145-155/t are still open; if your Asia supply chain touches Japan or Korea, the $20/t decline from Q2 is material. The China export surge won't last forever — Beijing has historically imposed export taxes or quotas when volumes get politically sensitive. Lock in Q3 premiums now.