Aluminum inventories on the London Metal Exchange have experienced a dramatic drawdown, falling 39 percent since late February to reach a one-year low. This sharp decline reflects a combination of factors: disrupted supply from Gulf producers, strong demand from automotive and construction sectors, and logistical constraints affecting delivery to LME warehouses.
The physical shortage has driven regional premiums to record levels. In Europe, duty-paid premiums have exceeded $680 per tonne, while the U.S. Midwest premium has surged above $580 per tonne. These premiums represent the additional cost buyers pay above the LME cash price to secure physical delivery in specific regions.
Trade flows are being reshaped as a result. Canadian producers are redirecting shipments from the U.S. to Europe, where premiums are more attractive. This rebalancing reflects a broader restructuring of global aluminum trade flows as buyers compete for increasingly scarce metal supplies.
Fastmarkets expects this trend to continue, forecasting that aluminum inventories will gradually erode over the coming years. China's primary aluminum capacity ceiling prevents meaningful supply expansion, while demand from automotive, solar, and power-grid sectors continues to grow, underpinning a structural tightening of the market.