Aluminum Trading Guide: Markets, Grades, and Pricing

Global aluminum production exceeds 68 million tonnes annually, with China producing approximately 58% of the total — making it by far the dominant force in aluminum markets. Other major producers include India, Russia (RUSAL), Canada, the UAE, and Australia. Primary aluminum is smelted from alumina (aluminum oxide), which in turn is refined from bauxite ore.

Aluminum demand is driven by transportation (30%), construction (25%), packaging (15%), electrical (12%), and consumer goods. The automotive and aerospace industries increasingly use aluminum for lightweighting, and the EV transition is boosting demand for aluminum in battery housings and vehicle frames.

Primary aluminum (99.7% Al minimum) is the standard traded on the London Metal Exchange (LME). The metal is typically traded as ingots (25 kg T-bars), sows (750 kg), or primary foundry alloy (various specifications). Aluminum alloy is traded as a separate LME contract, covering recycled and alloyed material.

Beyond primary metal, the aluminum product chain includes billets (for extrusion), rolling slabs (for flat-rolled products), wire rod (for electrical cable), and secondary/recycled aluminum (from scrap). Each product serves different end markets and has distinct pricing.

The LME aluminum price is the global benchmark for primary aluminum. Physical aluminum trades at the LME price plus a regional premium that covers the cost of delivering metal to a specific location. The Midwest US premium, European duty-paid premium, and CIF Japan premium are the most widely quoted regional premiums.

Regional premiums have been volatile in recent years, sometimes reaching 20-30% of the LME base price due to logistics constraints and sanctions on Russian aluminum. The 'all-in' price (LME + premium) is what end consumers actually pay. Value-added products like billets and wire rod carry additional conversion premiums.

The aluminum supply chain starts with bauxite mining (Australia, Guinea, Brazil), followed by alumina refining (China, Australia, Brazil), and finally smelting (China, India, Russia, Canada). Smelting is extremely energy-intensive — approximately 14-16 MWh per tonne of aluminum — making cheap electricity the key factor in smelter location.

Primary aluminum is stored in LME-registered warehouses around the world, with significant inventories in Malaysia, Singapore, the US, and Europe. Warehouse stocks and their movements are closely watched as indicators of supply-demand balance. Shipping aluminum in containers is common for smaller quantities, while bulk vessels handle larger shipments.