Aluminium Prices Mask Deeper Supply Chain Tensions

Aluminium prices have stabilized at USD 3,000 per tonne, returning to pre-February disruption levels, yet this apparent calm conceals persistent strain in the physical supply chain. Nearly 3 million tonnes of Gulf production capacity remain offline eight months after Iranian military operations and Strait of Hormuz shipping disruptions, forcing the market to rely on Chinese and Indonesian alternative supplies. Despite these replacement sources, physical premiums remain significantly elevated across all major regions (Asia, Europe, and North America), with LME inventories at historic lows and the composition increasingly tilted toward Russian metal that many Western buyers avoid.

The mismatch between benchmark price stability and tight physical conditions reflects a market in transition rather than recovery. Japanese buyers face USD 255 per tonne premiums (up from USD 200 pre-disruption), while European premiums have doubled to USD 559 per tonne and US Midwest premiums exceed USD 2,300 per tonne including Trump tariffs. This geographic divergence signals that supply normalization remains incomplete and unevenly distributed, creating operational challenges for buyers across multiple regions.

For supply chain professionals, this situation presents both risk and opportunity. Companies sourcing aluminium must navigate volatile regional premiums, constrained inventory availability, and geopolitical uncertainty affecting critical shipping lanes. The structural shift toward increased Indonesian production and Chinese semi-finished exports may reshape long-term sourcing strategies, while near-term tightness in futures markets suggests persistent cost pressure through the medium term.