Key Points

• LME inventories plunge: Aluminum stocks have fallen approximately 56% year to date, reaching their lowest reported level since 1990.
• Spot premiums surge: Cash aluminum traded around $92/MT above three-month futures on November 9 as buyers competed for immediately available metal.
• Supply relief remains uncertain: Middle East disruptions and limited exchange-deliverable supply are offsetting expectations of increased Indonesian output.

SCRAPMONSTER EDGE | ALUMINUM MARKET ANALYSIS

Why More Aluminum Production May Not Ease Today's Shortage

Aluminum prices are sending two different signals. The immediate market is tight, with cash metal commanding a significant premium. Longer-term expectations are softer because Indonesian smelting capacity is expanding.

However, additional production does not automatically create more metal available for delivery against LME contracts. The metal must meet exchange requirements and be delivered into the relevant warehouse system.

The LME's November 9 official cash settlement stood at $3,147/MT, compared with the official three-month price of $3,059.50/MT, a premium of $87.50/MT.

Industry takeaway: Aluminum scrap processors, manufacturers and traders should monitor cash-to-three-month spreads, regional physical premiums and available warehouse stocks alongside benchmark futures prices. Tight primary aluminum supply can influence purchasing conditions, but does not automatically produce equivalent increases across every scrap grade.

LME Aluminum Inventories Fall to Multi-Decade Lows

LME aluminum warehouse inventories declined to approximately 226,975 metric tonnes on November 9, according to exchange data compiled by Westmetall.

Inventories have contracted sharply during the year, leaving less immediately deliverable material available to meet market demand.

On November 9, cash aluminum was quoted at a premium of approximately $92 per tonne over three-month futures during trading, according to Bloomberg.

The market's official end-of-day cash-to-three-month price comparison showed a premium of $87.50 per tonne. The difference reflects the observation time and pricing basis.

Steep backwardation can encourage holders of physical aluminum to deliver metal into exchange warehouses. However, that incentive has so far been insufficient to restore inventories significantly.

Middle East Disruptions and Trade Barriers Restrict Supply

Aluminum shipments from the Persian Gulf continue to face higher transportation costs, longer delivery routes and logistical risks following disruptions associated with the Middle East conflict.

Some regional smelters are also recovering from earlier attacks and operating interruptions.

Meanwhile, China's restrictions on domestic aluminum production capacity and trade barriers affecting the United States and Europe have reduced the availability of material that can quickly enter the LME warehouse system.

Regional premiums can make direct sales to industrial buyers more attractive than placing metal into exchange warehouses, further limiting near-term replenishment.

Indonesia's Growing Output Could Change the Longer-Term Outlook

Indonesia is expanding aluminum production capacity, creating expectations that the global market could move toward surplus in the coming years.

However, the additional Indonesian metal described in the current market reporting is not yet registered for delivery on the LME.

As a result, additional production does not necessarily resolve the immediate shortage of exchange-deliverable aluminum.

Ewa Manthey, commodities strategist at ING Bank, warned that tight physical availability could require wider backwardation to attract metal into LME warehouses.

ING nevertheless sees greater downside risks for aluminum prices over the longer term as additional production becomes available.

Also Read: Chinese Aluminum Producers Expand Overseas as Domestic Capacity Nears Its Limit.

November Futures Positions Add to Market Pressure

The shortage of deliverable aluminum is also affecting futures traders ahead of the November contract's maturity.

LME data cited by Bloomberg identified four unidentified holders of long positions collectively representing at least 25% of outstanding November aluminum open interest.

Backwardation can create losses for short-position holders who need to roll contracts forward at unfavorable prices because they cannot secure metal for physical delivery.

Conversely, holders of long positions may benefit from the pricing structure, depending on their exposure and trading strategy.

Although the November squeeze is the immediate focus, the LME forward curve described in the report remained in backwardation through 2028, suggesting that expectations of tight nearby supply extended beyond the current contract month.

Aluminum Ends Monday Near $3,067 per Tonne

The benchmark LME three-month aluminum contract gained approximately 0.1% to $3,066.50 per tonne at Monday's close, according to Bloomberg market reporting.

Copper also advanced, rising approximately 0.9% to $13,896.50 per tonne during the session.

These reported market-closing observations differ from the LME's separately published Official Prices and should not be treated as interchangeable settlement series.

The near-term aluminum outlook remains dependent on warehouse stock movements, physical delivery incentives, Middle East supply conditions and the timing of additional Indonesian production.