The steady draw on LME aluminum warehouses has stalled. After declining from 380,000t in January to a May low of 305,000t, inventories have leveled at 315,300t. The pause reflects a shift in physical market dynamics: European buyers are reducing inventory commitments amid weak end-user demand.
Spot premiums in Rotterdam fell to $180-200/t over LME cash, the lowest since February. The premium compression signals ample nearby availability despite the lower headline stock number. Market participants report that most of the remaining LME warrants are tied up in financing deals in Asian warehouses, inflating the effective tightness of the reported figure.
On the supply side, global ex-China smelter utilization has dropped to 76%, down from 82% in mid-2025. European smelters remain under pressure from elevated power costs, with German and French smelters running at 65-70% capacity. In North America, US smelter output has been stable under the protection of Section 232 tariffs.
The market is caught between declining ex-China supply and rising Chinese export volumes. Total global primary aluminum supply still grew 3.5% year-on-year in Q1 2026, driven entirely by Chinese output expansion. The rest of the world produced 1.2% less aluminum year-on-year.
The stock draw pause and premium compression suggest the physical market is better supplied than the headline LME stock number implies. European buyers should expect further premium softening in Q3. For fixed-price contracts, waiting for the $3,300-3,400/mt zone offers a better risk-reward. Keep tracking the weekly LME stock report — a resumption of draws below 290,000t would change the picture.