Due to declining inventories, the aluminum market is experiencing a serious supply squeeze. Buyers are facing higher spot prices, and there is little hope for relief in the short term. Both the London Metal Exchange and the Shanghai market present a “spot premium” structure: spot prices are higher than long-term futures due to limited spot delivery. The pressure comes from a sharp decline in inventories supporting contracts — LME inventories have plummeted 56% this year, to their lowest level since 1990. Traders and manufacturers are being repeatedly impacted by this trend; a surge in Indonesian production may push the global market into excess in the next few years, but supply constraints may worsen further before new products arrive.

Due to declining inventories, the aluminum market is experiencing a serious supply squeeze. Buyers are facing higher spot prices, and there is little hope for relief in the short term. Both the London Metal Exchange and the Shanghai market present a “spot premium” structure: spot prices are higher than long-term futures due to limited spot delivery. The pressure comes from a sharp decline in inventories supporting contracts — LME inventories have plummeted 56% this year, to their lowest level since 1990. Traders and manufacturers are being repeatedly impacted by this trend; a surge in Indonesian production may push the global market into excess in the next few years, but supply constraints may worsen further before new products arrive.