Tight Supply Outside China Continues, China’s Inventory Remains Under Pressure [SMM Analysis]

The current global aluminum market showed a clear divergence between markets outside China and China. LME remained strong amid supply-side disruptions, while the Chinese market also strengthened under supply disruptions, though its overall performance was still relatively weaker than LME. Details on supply and demand, trade, and market structure are as follows:

I. Overseas Aluminum Market: Tight Supply Became More Prominent, Inventory Remained Under Pressure

The core issue in the overseas aluminum market centered on supply contraction and low inventory, compounded by disruptions from geopolitical conflicts, with the tight supply pattern continuing to intensify. From LME inventory data, inventory was still in a sustained downtrend, and its support for the market weakened significantly. Based on historical and recent data, LME cancelled warrants previously peaked at 178,000 mt, accounting for as much as 39 of total inventory. As a result, LME’s actually available effective inventory fell to the lowest level since May 2025, further highlighting the tight supply pattern outside China.

The supply-side contraction further amplified the deficit in overseas markets, with production cuts at the two key projects, EGA and Alba, having a particularly prominent impact. On March 28, EGA’s Al Taweelah production site in the UAE and Alba’s plant in Bahrain were both attacked, and equipment damage sharply increased the risk of capacity disruptions. This, combined with Alba having already started production cuts on three production lines on March 15 due to shipping disruptions in the Strait of Hormuz, and Qatar’s Qatalum smelter having shut down 40 of its capacity on March 12 due to a natural gas supply interruption, means the supply gap in overseas aluminum ingot is expected to continue widening. Meanwhile, high energy costs in Europe also led to production cuts and reduced output of local fabricated products, further exacerbating supply tightness.

Tight supply directly pushed premiums in overseas spot markets sharply higher. Affected by supply concerns triggered by escalating geopolitical conflict in the Middle East, the Q2 MJP price rose about $156.5/mt to $351.5/mt. Specifically, by month-end, premiums in major regions all showed a significant upward trend: CIF South Korea premiums rose from $168/mt at the beginning of the month to $292/mt; CIF Thailand premiums rose from $183/mt to $317/mt; European duty-unpaid premiums rose from $345/mt to $400/mt; US Midwest DDP premiums rose from 103.75¢/lb at the beginning of the month to 105.5¢/lb, fully reflecting that current expectations of tight overseas aluminum ingot supply drove sellers to raise offers.

From downstream demand and procurement pace across overseas regions, clear divergence was evident:

• South Korea: Earlier restocking had already been completed in stages, and downstream purchase and restocking sentiment was currently subdued, with demand providing weak support to the market;
• Southeast Asia: The current market mainly focused on executing long-term contract orders, with only some spot order restocking demand, and overall momentum for new purchases was insufficient;
• Europe: Affected by production cuts in Qatar and Bahrain’s aluminum industry, market concerns over a supply deficit continued to rise, and downstream players were gradually carrying out restocking purchases, with demand relatively strong;
• US: Inventory was currently at a low level and was entering a restocking cycle, providing some support to the market.

II. China’s Aluminum Market: Under Pressure from Inventory at High Levels, with Suppressed and Weak Demand

In contrast to the strength of the LME, although China’s aluminum market was likewise supported by supply disruptions and showed an upward trend, its overall performance remained relatively weaker than the LME, with the core pattern characterized by “elevated inventory and suppressed demand.” On the price front, persistently high aluminum prices in China continued to restrain downstream purchasing demand. At present, the downstream procurement pace is mainly driven by order-based just-in-time procurement, while willingness to restock proactively remains subdued, making it difficult to form stronger demand support.

China has not effectively eased inventory pressure—domestic aluminum ingot remains at inventory at high levels, and the pace of inventory drawdown was slower than expectations. Inventory drawdown is expected to take even longer going forward. Inventory at high levels and high aluminum prices have formed a dual constraint, leaving the Chinese market with upward momentum, but weaker than that of the LME. In the short term, spot premiums in China are expected to remain under pressure and widen further.

Source: SMM