LME aluminum traded at $3,164/mt on June 27, well below the early-June four-year high of $3,752/t but still firmly above the $3,000/t psychological floor that has held since March. The retreat reflects profit-taking after the Q1 rally and cautious positioning ahead of Q3 contract negotiations. But the physical market tells a different story — LME on-warrant stocks have collapsed 40% year-to-date to 310,225t as of June 25, with cancelled warrants running at 22% of registered inventory, meaning effective available metal is thinner than headline numbers suggest.
Goldman Sachs revised its 2026 global aluminum balance to a 720,000t deficit, up from 570,000t previously, in a June 24 note to clients. The bank cited China's 45-million-tonne annual smelting capacity cap — which limits how much new production can be added despite strong demand — and the continuing drag from European smelter curtailments. European primary aluminum production is running at roughly 85% of pre-energy-crisis levels, according to European Aluminium association data, with high power costs preventing full restarts at curtailed capacity.
The premium market reinforces the tightness. European duty-paid premiums have reached $380–400/t over LME, an all-time high driven by the combination of reduced domestic production, logistical bottlenecks at Rotterdam, and the diversion of Middle Eastern supply to Asia where premiums are also rising. US Midwest premiums are at $480–500/t, reflecting strong automotive and packaging demand. Fastmarkets notes that all-in delivered aluminum costs for European buyers are effectively at record levels even if the LME benchmark appears 10% below its early-June peak.
Looking ahead, Goldman expects the deficit to narrow to a 590,000t surplus in 2027 as new capacity in Indonesia and India comes online and European smelters gradually restart. ING takes a more cautious view, projecting a smaller 350,000t deficit in 2026 and warning that demand could soften if global manufacturing PMIs deteriorate. The next data point to watch: LME July warehouse reports, which will show whether the Q2 destocking trend is accelerating.
Aluminum physical premiums are at record highs. If you buy on an LME-plus-premium basis, your all-in cost is higher than the LME benchmark suggests — European duty-paid at $380–400/t over LME means your effective price is roughly $3,540–,560/mt. For Q3 contract renewals, lock in premiums now. The Goldman deficit forecast implies upward pressure on both the LME price and premiums through year-end. Consider diversifying your supplier base — Middle Eastern and Indian supply is growing and may offer competitive premiums as new capacity ramps, though shipping times are longer.