LME aluminum stocks look like a comfortable cushion until you check what is actually sitting in the sheds. On warrant aluminum stocks outside China are 95% Russian origin material, which means the headline inventory figure overstates the metal Western buyers can realistically draw on. Refined production outside China is on track for a second consecutive quarterly decline, and backwardation has reemerged on the London Metal Exchange alongside steady stock drawdowns. For anyone with physical aluminum exposure, the composition of that inventory now matters more than its size.
Natalie Scott-Gray is a Senior Metals at StoneX in London, with more than 12 years covering London Metal Exchange and battery material metals across EMEA and Asia. Her coverage runs across metals supply and demand, including the warrant flows, regional production data and premium settlements that determine how much aluminum is genuinely available outside China.
Key Themes from the Discussion
On warrant aluminum stocks outside China are 95% Russian origin material.
Aluminum Bahrain reports second quarter production down 61% year on year, deepening the supply shortfall.
Backwardation returns to the London Metal Exchange as stock drawdowns build ahead of the fourth quarter.
Russian Metal Dominates LME Aluminum Warrants and Thins Western Cover
"The primary driver is stemming from historically low stocks outside of China, with LME on warrant stocks made up of 95% Russian origin material." Scott-Gray is describing an inventory base that reads as adequate in aggregate but is concentrated in metal that many Western consumers will not or cannot take. Refined production outside China is on track for a second consecutive quarterly decline, worsened by Aluminum Bahrain posting "Q2 production down 61% year on year" and a 50% output reduction at Norsk Hydro's Alunorte alumina refinery in Brazil. Consequently, the accessible pool of Western aluminum has narrowed faster than headline London Metal Exchange inventory suggests, which is why backwardation has returned to the curve rather than the market simply flattening out.
Aluminum Supply Growth Arrives Too Late to Ease Current Tightness
The supply losses tightening aluminum now are already being reversed further out on the curve. Middle Eastern production continues to recover faster than expected, Chinese backed capacity expansions in Indonesia are progressing rapidly, and Chinese output remains near record levels despite official capacity constraints. According to Scott-Gray, "the market is currently focused on immediate physical tightness rather than future supply growth, but eventually inventory rebuilding will become the more important pricing driver." With substantial surpluses expected to emerge from 2027 onward, the practical question for physical aluminum buyers is how long the current squeeze holds before restocking takes over as the dominant influence.
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