A low-profile battle for aluminum is unfolding.

The London aluminum market is sending its strongest supply-tightness signal in nearly two decades. On Monday, London Metal Exchange (LME) aluminum futures prices surged to a four-year high, while a key indicator of spot supply tightness—the premium of the cash (spot) price over the three-month futures price—spiked 37% to $91.50 per ton, marking the largest backwardation since 2007. This signals that traders are aggressively bidding up spot supplies at a premium. The immediate trigger for this market anomaly was the formal implementation on Monday morning of the Trump administration’s Strait of Hormuz blockade measures, coupled with Emirates Global Aluminum (EGA), the Gulf region’s largest aluminum producer, declaring force majeure on certain contracts. The confluence of these two shocks has further strained an already fragile global aluminum supply chain. Dual shocks spark a supply crisis According to CCTV International News, U.S. President Trump told reporters upon arriving at Andrews Air Force Base in Maryland aboard Air Force One that U.S. military forces would impose a blockade on Iran at 10 a.m. Eastern Time on April 13—10 p.m. Beijing time tonight. Meanwhile, EGA announced over the weekend that its Al Taweelah smelter had been forced to halt operations due to Iranian missile and drone attacks, prompting the company to invoke force majeure on certain contracts. Documents obtained by Bloomberg show this declaration was formally issued on Saturday. EGA is jointly owned by Abu Dhabi’s Mubadala Investment Company and Dubai Investment Company. In 2025, its cast metal sales reached 2.83 million tons—approximately 4% of global aluminum output. Overall, the Middle East accounts for roughly 9% of global aluminum production. Price-spread signal: the most extreme supply squeeze in 19 years

Two giants control the market; the London aluminum market faces its most severe 'short squeeze' in decades.

The London Metal Exchange aluminum market is confronting its most severe supply squeeze in decades, with spot prices briefly hitting a record-high premium—drawing widespread attention to the market’s extreme tightness. On Wednesday, the premium of the spot aluminum contract over the three-month futures benchmark surged to $147 per ton—a record high in over 30 years of available data. At the same time, LME aluminum inventories have plunged to their lowest level since 1990, and positions held by just two traders collectively account for 60% to 80% of the exchange’s readily available inventory, sharply tightening market liquidity. The LME stated it has established a series of mechanisms to prevent large or dominant positions from exerting undue influence and retains the authority to require market participants to manage such positions. Although the ‘tomorrow/next day’ (Tom/next) spread narrowed from a peak of $31.73 per ton to $1 on Wednesday—indicating some short-term relief—the forward curve shows the backwardation structure will persist through 2028. Spot premium hits record high; inventories fall to 30-year low On Wednesday, the premium of the LME aluminum spot contract over the three-month futures contract climbed to $147 per ton—the highest level in over 30 years. Just in mid-October this year, this spread was still in contango; it flipped sharply into backwardation as exchange warehouse inventories plummeted. The Tom/next spread—a gauge of short-term funding costs—also spiked to $31.73 per ton, the highest since 2021, vividly reflecting the intensity with which traders are competing for remaining deliverable metal. This backwardation structure in the LME aluminum market represents the most extreme since the late 1980s—when Marc Rich + Co orchestrated a corner, pushing the spot-to-three-month spread above $1,000 per ton. In response, the LME introduced new rules requiring traders holding large positions to lend out warehouse warrants to the market, thereby capping the extent of backwardation. Two traders control over 60% of available inventory The core driver of supply tightness lies in the extreme concentration of inventory.

London Aluminum Market Faces Biggest Supply Squeeze in Decades

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LME aluminum inventories plummeted to 1990 lows, creating record premiums as two traders dominate available stock. Geopolitical conflicts and production caps exacerbate shortages, despite potential future relief from Indonesian supply.

bloomberg

2026-11-11

London Aluminum Market Faces Biggest Supply Squeeze in Decades

London Aluminum Market Faces Biggest Supply Squeeze in Decades

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