LME Aluminium's Tightest Squeeze Since 2007 — And This Time It's Real

By Siam Sukkhee Trading Co., Ltd — 2026-07-19 — LME metals market analysis

I watched the cash-to-three-month spread hit $95.50 a tonne in May. That's the tightest backwardation on LME aluminium since 2007.

And I'll be honest — the instant comparison to 2007 is lazy.

Back in March, Iran's Revolutionary Guard Corps hit Alba in Bahrain and Emirates Global Aluminium in Abu Dhabi. Eight workers injured between them. The LME responded predictably: three-month contracts jumped 6% to $3,492 a tonne on the Monday. By late May, cash prices were sitting at $3,769.50. The forward curve flipped. Hard.

Now, I've traded metals long enough to know what a technical squeeze looks like. You get positioning crowded in one direction, someone unwinds, the curve inverts for a week or so, and then life moves on. That's 2007 in a nutshell — messy but temporary.

This is different.

Alba shut its first three production lines in mid-March. Not after the strikes — before. The moment Hormuz disruptions started cutting off alumina shipments, they went precautionary. Those three lines are roughly 304,000 tonnes of annual capacity just sitting there now. That's 19% of their whole operation. Then EGA in Abu Dhabi took actual damage from the March 28 attacks. Start adding up all the shut capacity across the GCC — which produces around 8.35% of global primary aluminium — and you're looking at somewhere between 2.3 and 3 million tonnes effectively removed from supply.

The warehouse data backs this up. January 2026, LME stocks were around 420,000 tonnes. By July 10, they'd fallen to 289,225 tonnes. That's a 31% drop in six months.

Actually, that's not quite right — they haven't been this thin since 2022. The cancelled warrants stayed elevated the whole time, which is the market's way of saying people are pulling metal out for actual physical delivery, not just trading paper.

Regional premiums moved harder than the forward curve. Rotterdam P1020A went from $360-390 a tonne in February to $565-605 by May. That's a 55-60% jump in less than four months. US Midwest premiums pushed above 104 cents per pound. Europe got hit worst because the continent imports roughly 20% of its aluminium from the Middle East, and there's no way around a chokepoint that is quite literally the Strait itself. Alumina comes by ship. Metal leaves by ship. Unlike oil, there's no pipeline.

The real problem is the timing.

Geopolitical disruptions don't resolve like trading squeezes do. Breakwave reported that global seaborne alumina volumes fell close to 4% in Q2 2026 to 10.4 million tonnes. You can't calendar-spread your way through 4 million tonnes of missing supply. For buyers, the choice is stark: lock in forward contracts now or pay the cash premium later when you actually need the metal. The harder question is what happens when Alba's potlines stay dark.

The smelter calls the shutdown an operational measure, not permanent closure. More or less. Restarting potlines is slow, expensive, and it won't happen while Hormuz is contested. So the backwardation isn't going anywhere as far as I can tell.

Tags: Alba, LME Aluminium, Emirates Global Aluminium, LME aluminium backwardation 2026, Strait of Hormuz aluminium supply disruption, Gulf smelter strikes aluminium price