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.

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