The aluminium market is sending a mixed signal right now...

Prices are rising while inventories continue to fall.

At Euralco we receive daily questions from customers across Europe about the aluminium market. Because we keep explaining the same developments in calls and emails, we thought it might be useful to share a short observation here.

Looking at the latest data from the London Metal Exchange, two things stand out clearly. Aluminium prices have been trending upward in recent months, while LME inventories have declined to roughly ~450,000 tonnes.

To visualise this relationship we plotted LME aluminium prices against visible LME inventories (see chart below).

In commodity markets, this combination matters. Inventories act as the shock absorber of the system. When stocks decline, markets become more sensitive to disruptions in logistics, energy or production.

The aluminium market currently faces several sources of uncertainty.
Over the past two decades, the Gulf region has become a major pillar of global aluminium supply. Large smelters in the UAE, Bahrain, Qatar and Oman export significant volumes to Europe, Asia and North America.

Even when production remains stable, disruptions in shipping routes or insurance conditions can slow the physical flow of metal into the global system. Energy costs are another key variable. Aluminium production is extremely energy-intensive, and rising gas or electricity prices can quickly affect production economics and market sentiment.

For the coming two to three months, the most likely scenario appears to be continued volatility rather than a clear directional move. If geopolitical tensions ease and logistics normalise, aluminium prices could stabilise or soften as risk premiums unwind. On the other hand, if inventories continue to decline while energy costs and shipping risks remain elevated, prices may remain supported or move higher. Several analysts quoted in recent commodity reports have suggested that the market is currently pricing in risk rather than an actual supply disruption.

At Euralco we therefore continue to monitor four indicators closely:
• LME inventories
• physical market premiums
• logistics and shipping developments
• energy costs

Together they usually tell the real story behind aluminium prices.
As an aluminium market observer, we will continue to monitor developments and share observations when relevant.

Sources
London Metal Exchange (LME)
Westmetall aluminium market data
Reuters commodities reporting
Financial Times commodities coverage
S&P Global / Fastmarkets aluminium analysis

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