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2026-05-22 20:55:59
[Aluminum Market Suffers Generational Shock, Warning Lights Flicker on Gulf Supply Collapse] ⑴ The US-Iran conflict is becoming one of the most severe supply shocks in the history of the aluminum market. Data from the International Aluminium Institute shows that primary aluminum production in the Gulf region plummeted to its lowest level in over a decade in April, with the region's annualized operating rate decreasing by 2 million tons in March and April. Two Gulf aluminum smelters were damaged in missile attacks; Al Taweelah, part of Emirates Global Aluminium, will require a year to repair, and Qatar Aluminium has already reduced production. ⑵ The London Metal Exchange benchmark cash-to-three-month spread turned into a cash premium in early March, currently at $80, the tightest level since 2007. Unlike the brief short squeeze of that year, this tension is persistent and structural. LME registered inventories have decreased by one-third since the beginning of the year to 339,475 tons, with approximately 68,000 tons cancelled in the past two weeks in preparation for delivery. The remaining warrants are mostly for Russian aluminum, which is useless to European and American buyers due to sanctions. (3) Global physical premiums have surged: Japan's spot premium has doubled since the start of the war to $316 per ton, with the second-quarter delivery premium reaching $350, an 11-year high; Europe's duty-paid premium has risen 58% since early March, while the pre-duty premium has risen 75%; the premium in the US Midwest has increased relatively moderately at 8%, but was already at a record high due to the 50% import tariff. In Rotterdam, the premium for aluminum extrusion billets has doubled to $1,100 above the LME benchmark price. (4) Western production has decreased by 2.4 million tons in the past two months, coupled with the closure of the Mozambique Mozambique smelter due to high energy prices. The calm prices on the London Metal Exchange mask a severe tightening of supply in the processing sector, with physical buyers going to great lengths to secure supplies. This is a generational shock to a market that has experienced 20 years of structural surplus and high inventory, and aluminum prices have not yet fully reflected the dramatic changes in the supply chain.
