Supply Shortage Concerns Ease as LME Aluminum Prices Drop Nearly 2%

Concerns over an increasingly tight aluminum supply have eased as major smelters restored production capacity ahead of schedule, causing London Metal Exchange (LME) aluminum prices to fall for two consecutive days. As of Wednesday’s (12th) close, both spot and various contract prices for LME aluminum recorded a significant decline of nearly 2%.

Emirates Global Aluminium (EGA) announced that its main smelter, which was shut down following an attack in March this year, is expected to return to pre-war production levels by the first quarter of next year—earlier than anticipated. Additionally, Australia’s largest Tomago smelter has secured 2.5 billion Australian dollars (approximately 1.8 billion USD) in government relief funding, ensuring the continued operation of its annual 590,000-ton production capacity. These developments effectively offset earlier bullish sentiment triggered by heightened Middle East tensions and disrupted export routes.

According to LME data, aluminum spot buying prices dropped 1.93% on August 12 to USD 3,307 per ton, while three-month futures also declined by 1.93% to USD 3,308 per ton.

Despite LME aluminum inventories remaining at their lowest historical levels since 1990, and daily opening stocks declining slightly by 0.59% to 253,400 tons, market expectations for future supply increases have taken center stage.

In a report released on Thursday, Chaos Ternary Futures Co. indicated that as governments actively sustain loss-making operations and bring new supplies online, the aluminum market’s supply-demand balance is gradually shifting from deficit to surplus, leading to downward pressure on prices in the medium term. Besides aluminum, other base metals also broadly declined, with copper and zinc prices falling 0.4% and 0.8%, respectively.