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| LME Aluminum |
London Metal Exchange aluminum prices have shed their war risk premium despite ongoing military escalations in the Gulf region. Benchmark three-month aluminum currently trades near $3,170 per ton, mirroring pre-conflict levels seen in late February. Meanwhile, supply chain disruptions have removed over 2 million metric tons of annualized production capacity from the market.
Supply Deficits Offset by Chinese and Indonesian Expansion
Emirates Global Aluminium has initiated repairs at its Al Taweelah facility, but regional smelter run rates remain depressed. To compensate for this deficit, Chinese smelters have ramped up semi-manufactured aluminum exports, utilizing strong profit margins and near-maximum capacity utilization. Simultaneously, Indonesia is rapidly emerging as a primary metal supplier through aggressive new smelter investments.
Physical Premiums Signal Persistent Underlying Market Risks
Inventory drawdowns and previous stockpiling ahead of European carbon border regulations have successfully cushioned the immediate supply shock. However, physical market premiums tell a very different story, as European duty-unpaid premiums have surged significantly since the conflict began. Therefore, traders should remain cautious as physical supply tightness contradicts the complacency seen in futures markets.
ScrapInsight Commentary
The disappearance of the LME war premium contrasts sharply with surging physical delivery premiums across Europe and Asia. Consequently, underlying market fragility persists, suggesting that any further logistical shocks could trigger rapid price volatility.
