The London aluminum market is sending its strongest supply tightness signals in nearly two decades.

On Monday, LME aluminum futures prices climbed to a four-year high, while a key spread indicator measuring spot supply tightness surged sharply—the premium for spot against three-month futures jumped 37% to $91.50 per ton, marking the largest backwardation since 2007 and signaling that traders are willing to pay premiums to secure physical supplies.

The immediate trigger for this market anomaly was the formal implementation on Monday morning of the Trump administration's blockade measures on the Strait of Hormuz, combined with Emirates Global Aluminum (EGA), the largest aluminum producer in the Gulf region, announcing force majeure clauses for certain contracts. The combined impact of these two shocks has further strained the already fragile global aluminum supply chain.

Dual Shocks Trigger Supply Crisis

According to CCTV International News, President Trump stated to the media after arriving at Andrews Air Force Base in Maryland aboard "Air Force One" that the U.S. military would impose a blockade on Iran at 10:00 AM Eastern Time on April 13, which corresponds to 10:00 PM Beijing time tonight. Meanwhile, EGA announced over the weekend that due to Iranian missile and drone attacks forcing a shutdown of its Al Taweelah smelter, the company had activated force majeure clauses for certain contracts. Documents obtained by Bloomberg indicate that the aforementioned declaration was formally issued on Saturday.

Owned jointly by Abu Dhabi's Mubadala Investment Company and Dubai Investment Company, EGA achieved a cast metal sales volume of 2.83 million tons in 2025, accounting for approximately 4% of global aluminum production. The entire Middle East region accounts for about 9% of global aluminum supply.

Spread Signals: The Most Extreme Supply Squeeze in 19 Years

The sharp movement in the front-end curve of the LME aluminum market is the most direct manifestation of current supply pressure.

The spread between spot and three-month futures jumped from $66.70 per ton last Friday by 37% to $91.50, marking the largest backwardation since 2007. In a normal market state (contango), forward prices should exceed spot prices to cover storage and financing costs; however, the current significant backwardation indicates that traders are willing to pay substantial premiums to obtain physical goods immediately, reflecting a severe judgment of spot supply scarcity in the market.

This level of spread was last seen during the peak of the global commodity supercycle in 2007. The current front-end squeeze suggests that market liquidity has become extremely fragile, with convenience yields for holding physical inventory rising sharply, yet even so, it remains difficult to fill the supply gap.

Year-to-Date Gain Reaches 18%; Analysts Warn of Intense Supply Shock

LME aluminum rose more than 2% on Monday to $3,577 per ton, continuing the broader rally in industrial metals driven by war risks and supply concerns since the beginning of the year—aluminum prices have now gained approximately 18% year-to-date.

Goldman Sachs commodities analyst James McGeoch stated earlier this month in a client report: "It is hard to imagine a larger metal supply shock than this. The market previously had high expectations regarding the situation's trajectory, but yesterday's initial reaction was to avoid uncertainty. If history can be referenced, this attitude should be replaced by new long positions."

The current situation indicates that as geopolitical risks in the Middle East continue to escalate, the supply tightness in the aluminum market is unlikely to ease in the short term, and cost pressures faced by traders and industrial users will continue to rise.