Prices Surge to Four Year Highs
Aluminium prices climbed sharply over the past month, rising 10.6% and reaching USD 3427-3,428/tonne by March 11, the highest in nearly four years.
The rally was driven primarily by heightened geopolitical risks, most notably the closure of the Strait of Hormuz, which halted shipments from the Persian Gulf – a region supplying about 9% of global output. This sudden disruption tightened pysicaly availability and pushed futures markets higher.
At the same time, Beijing’s ongoing production cap of 45 million tonnes/year prevented China from increasing output to offset supply losses, reinforcing concerns about global tightness. With demand accelerating in AI hardware, energystorage infrastructure and solar supply chains, the price rise reflects both supply interruptions and strong downstream consumption.
Macro models expect aluminium to average USD 3,437/tonne by the end of Q1 2026 with potential to rise toward USD 3,616/tonne within 12 months, driven by persistent supplyside constraints and expanding decarbonisationlinked demand.
LME aluminium inventories typically fluctuate between 350,000 and 800,000 tonnes, and historically, stocks below 400,000 tonnes have coincided with higher prices and heightened supply risks. With current inventories around 463,550 tonnes, levels are edging toward the lower bound of this range, especially given the rapid pace of recent drawdowns.
Source: LME
Trade Flows Shift Amid Supply Disruptions
Global trade flows shifted noticeably as buyers scrambled to secure alternative sources of primary metal. The disruption of Persian Gulf cargoes rerouted traders toward Asia and Europe, where producers offered limited replacement volumes. Freight bottlenecks and port congestion amplified tightness, increasing regional physical premia even as headline exchange prices rose.
China remained a dominant force in aluminium scrap imports, continuing its structural shift toward secondary feedstock.
Source: China Customs
By late 2025 it had already imported roughly 1.8 million tonnes of scrap, and recent months indicate sustained buying from Southeast Asia, Europe, Japan and the UK. Given tightness in clean UBC and cast scrap, China’s presence continues to reshape global secondary flows.
Regional Premiums & Differentials Widen
Physical premiums widened across major markets as logistics challenges and regional disruptions drove divergences between LME benchmark pricing and local availability. Market participants must navigate dual price systems, including exchange benchmarks versus local premia and alloy spreads, which increasingly dictate margins for manufacturers and traders.
In Europe, CBAM-linked carbon costs added further upward pressure on premiums for lowcarbon or recycled aluminium. CRU’s latest intelligence also highlights increased volatility in premiums for valueadded casthouse products such as billet, slab and rod, as smelter power costs and energytransition regulations reshape regional supply economics.
The widening global differential between LME prices, CME benchmark futures and Shanghai premiums created intermittent arbitrage windows over the past month. The rise in LME prices to USD 3,269/tonne in early March, combined with higher regional premiums in Europe and Asia, allowed traders to explore interexchange hedges and physicaltopaper strategies.
However, persistent freight disruptions and elevated shipping costs constrained arbitrage capture.
Source: Drewry
Traders also had to manage accelerating futures volatility, which CME reports has increased interest in aluminium options as a tool for hedging price swings.
Supply Fundamentals Tighten Further
The past month reinforced long running structural tightness. On the supply side, energy cost pressures continue to challenge Western smelters, many of which struggle to remain profitable unless power prices fall below USD 35–50/MWh depending on technology.
These economics have led to smelter curtailments in Europe and parts of North America, deepening reliance on imports and recycled metal.
China remains the anchor of global supply, accounting for about 57% of global primary output, but government policy continues to restrict new capacity, largely steering production toward more efficient, lower emission facilities.
This has limited China’s ability to counterbalance global disruptions, helping to sustain the structural deficit in exChina primary supply.
Aluminium consumption remains strong across transportation, electrification renewable energy infrastructure and highp erformance manufacturing. The energy transition continues to push demand for light weighting, EV components, grid hardware and solar frames. Analysts project further growth in these downstream sectors through 2026, reflecting long term structural demand tailwinds.
