Spot prices skyrocket + inventory plummet, aluminum industry trapped in "supply black hole"

Due to the blockade of the Hormuz Strait, supply is restricted, and the shortage in the aluminum market continues to worsen: spot prices have soared, while exchange inventories have significantly declined. The conflict in the Gulf region has affected global aluminum buyers, with the region accounting for nearly 10% of global supply. Despite market expectations for a easing of tensions, the long-term closure of the strait and consecutive attacks on local smelters have raised concerns about the most severe aluminum shortage in decades. The aluminum spot premium hit a new high since 2007 On Friday, the tight supply situation was further evidenced: the London Metal Exchange (LME) aluminum spot price was $97 higher than the three-month futures price, hitting a new high since 2007. This backwardation phenomenon is a typical signal of insufficient supply. At the same time as this significant price difference, LME available stocks are also approaching historical lows. Bloomberg estimates that the total aluminum inventory at LME, the Chicago Mercantile Exchange (CME), and the Shanghai Futures Exchange can only meet global demand for less than five days. Among the six major metals traded on the LME, aluminum has the lowest number of available days in inventory. For the aluminum industry, which has long been plagued by oversupply, this signals a significant change in the landscape. Global aluminum inventories are depleting Since the conflict erupted, the three-month aluminum price has risen by more than 15%. On Friday, the LME aluminum price stabilized at around $3,660 per ton. Earlier this week, the price of aluminum briefly exceeded $3,700 per ton, hitting a four-year high. Several banks, including JPMorgan Chase and Citigroup, predict that aluminum prices will rise to $4,000 per ton. JPMorgan Chase warned that with the severe and ongoing supply gap in the global aluminum market, the industry is heading towards a significant supply-side "black hole." More crucially, the direct attacks by Iran on key smelters in Abu Dhabi and Bahrain have turned what may have been seen as "short-term transportation disruptions" into irreversible losses in smelting capacity. On Friday, the prices of copper and nickel remained relatively stable, while zinc, lead, and tin prices saw slight increases.