LME aluminum's cash-to-3-month spread widened to $71 per tonne backwardation in late May, the steepest since the 2022 energy crisis, as physical buyers compete for dwindling spot availability. The backwardation reflects acute near-term tightness driven by Middle East supply disruptions and European smelter closures that have removed over 1 million tonnes of annual capacity.
South32's Mozal smelter in Mozambique transitioned to care-and-maintenance in March, removing 560,000 tonnes of annual capacity in one of the largest single supply disruptions in recent history. Century Aluminum's Grundartangi smelter in Iceland continues operating at reduced capacity. UBS now expects global aluminum supply growth of only 0.3% in 2026, down sharply from 2.4%.
China's self-imposed 45Mt capacity cap limits its ability to fill the gap. Indonesia is adding smelter capacity but not fast enough to offset deficits before late 2026. US Midwest premiums have surged to $260-400/t on top of elevated LME prices, pushing all-in costs for American buyers above $5,200/t. The backwardated curve penalizes roll-overs, making spot purchases the most expensive option.