The text below is an edited version of an Insight originally written by Chris Lawson. Read the full version here or speak to a CRU expert about market intelligence and analysis relevant to your organisation.
Tightening physical supply and limited prompt availability are putting upward pressure on European aluminium premiums, even as LME aluminium prices have eased from their June peak. The divergence between duty-paid and duty-unpaid premiums highlights the growing tightness in the physical market.
Key takeaways
- LME aluminium prices have eased from their June peak but remain historically firm.
- Tight physical availability, low stocks and logistics constraints are supporting European duty-paid premiums.
- The widening divergence between duty-paid and duty-unpaid premiums could influence European aluminium flows if it increases further.
Why have aluminium prices remained firm?
Aluminium prices have remained firm because supply and inventory constraints are offsetting the downward pressure that would typically come from a strengthening US dollar and tighter Federal Reserve policy.
LME aluminium was trading at $3,275/t as of 22 September, below its June peak but still historically firm and above the key upward trend established since early July.
Why are European aluminium premiums rising?
European aluminium premiums are rising because physical availability is tightening, with low stocks, restricted prompt availability and logistical disruption putting pressure on the market. In Rotterdam, the duty-paid premium reached $533/t on 23 September, up $10/t on the week.
Vessel delays and rising logistics costs are adding to the pressure, while further vessel disruptions could keep European inventory categories tight potentially through November.
The strength in premiums is therefore being driven primarily by supply-side pressures rather than meaningful incremental demand.
Why are duty-paid and duty-unpaid premiums diverging?
Duty-paid premiums are rising faster because the physical market for immediately available material is tighter, while duty-unpaid premiums remain comparatively rangebound.
The duty-paid/duty-unpaid spread was $79/t as of 23 September, which is not yet wide enough to fully cover import duty and CBAM costs.
However, if the spread widens further, it could incentivise the clearing of duty-unpaid metal into Europe. This could increase the availability of duty-paid material and potentially moderate the premium over time.
What could happen to European aluminium premiums next?
European aluminium premiums could remain under upward pressure in Q4 if supply disruptions and limited prompt availability persist.
Middle Eastern supply disruptions, including limited Gulf smelter restarts and ongoing risks around the Strait of Hormuz, continue to constrain global supply. Meanwhile, Chinese production is approaching its national capacity cap, limiting the prospect of a significant supply surge.
Market participants remain cautious, with lean trading books and limited prompt duty-paid metal available. With new supply not expected to add significant length to the market in 2027, the relationship between physical availability and the duty-paid/duty-unpaid spread will remain important to watch.
If you are involved in the sales, trading, procurement or pricing of aluminium and related materials, join us at the CRU Aluminium Breakfast in Düsseldorf. Alternatively, you can speak to a CRU expert about today’s aluminium prices, the implications for your business and the market intelligence relevant to your organisation.
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