The aluminum market entered uncharted territory this week as LME cash prices breached $3,720 per tonne — a four-year high — driven by an escalating supply crisis emanating from the Strait of Hormuz. Militant disruptions to refinery and shipping operations have forced Gulf-based smelters, notably Qatalum in Qatar and Aluminium Bahrain (ALBA), to declare force majeure on deliveries.
Emirates Global Aluminium's flagship smelter, one of the largest single-site producers globally, is now facing an estimated recovery timeline of up to one year before returning to full capacity. Direct attacks on alumina refiners have further upended the regional supply chain, with bauxite-to-alumina processing severely curtailed across the Gulf. The ripple effects have been immediate: the LME forward curve has flipped into deep backwardation, with cash commanding a $59 premium over three-month metal — the widest spread in over a decade.
Traders are racing to secure physical tonnage as LME on-warrant stocks have dwindled to approximately 339,475 tonnes while cancelled warrants jumped 13% to 74,400 tonnes, signaling that metal is being pulled off the exchange for prompt delivery. The supply shock compounds an already strained market where global inventories sit at critically low levels relative to consumption.
With no end to the Hormuz disruption in sight and Gulf capacity unlikely to recover before mid-2027, buyers face a structurally tighter market. The 45% year-on-year price surge reflects not just a spot squeeze but a fundamental repricing of aluminum risk premiums.