LME Aluminum Drops 5.9% to $3,400 as Supply Disruptions Unwind

Aluminum prices took their biggest hit in three months on June 21 after two European producers announced plans to restart idled smelting capacity. In Norway, Hydro Aluminium confirmed the restart of 140,000t/year at its Sunndal smelter, citing improved power contract terms. In Iceland, Rio Tinto's ISAL smelter initiated a 140,000t/year restart of capacity curtailed since 2024, enabled by a new long-term power purchase agreement.

The restarts add a combined 280,000 tonnes per year of supply, equivalent to roughly 0.4% of global aluminum production, coming online over the next 4-6 months. The news reversed gains built over the prior six weeks when smelter curtailments in Europe and Australia pushed LME aluminum from $3,100 to $3,615.

LME aluminum warehouse stocks stand at 315,300t, down 0.8% week-over-week but still 12% above the 2025 year-end level. Cancelled warrants — material booked for delivery — fell to 22% of total, down from 28% in May, suggesting less near-term supply tightness. SHFE aluminum stocks at 186,000t are 8% above seasonal averages.

Chinese aluminum production hit a record 4.2 million tonnes in May, according to the National Bureau of Statistics, up 4.3% year-on-year. The Yunnan province suspension of power rationing measures allowed smelters to operate at 95% capacity, adding an estimated 200,000t of additional monthly output. Chinese semi-fabricated exports reached 520,000t in May, the highest since 2022.

The bearish turn has shifted the short-term outlook. JP Morgan cut its Q3 2026 aluminum price forecast from $3,500 to $3,200/t, citing the European restarts and Chinese supply growth. Goldman Sachs maintains a $3,500/t Q3 forecast but noted downside risk if the restarts accelerate.