LME aluminium is trading near four-year highs, with prices supported by the risk of supply disruptions linked to conflict in the Middle East. Ongoing instability has kept the market sensitive to geopolitical news and increased price swings.
Indicators of tight physical supply have strengthened, including higher cancelled warrants and faster stock withdrawals, especially at Port Klang. Cancelled warrants rose by 96,050t to 178,600t earlier in the week, the largest daily increase since May 2024.
Cancelled warrants now account for about 40% of total LME aluminium inventories, up from 9% at the start of the month. Aluminium is described as tighter than other base metals, which points to limited downside even as wider macro conditions remain a headwind.
We are seeing aluminum prices holding near $3,350 per tonne, sustained by ongoing supply fears linked to Middle East tensions. The market is extremely sensitive to geopolitical headlines, which is keeping volatility high. This environment suggests that traders should be prepared for sharp price movements based on daily news flow.
The physical market tightness is becoming more obvious, supporting the view that prices have a solid floor. Data released this morning, March 12, 2026, showed on-warrant LME stocks fell below 250,000 tonnes, a level we haven’t seen since the fourth quarter of 2025. This continued draw on inventories, with cancelled warrants representing around 40% of total stock, signals strong real-world demand.
This setup favors derivative strategies positioned for upward price pressure or continued high volatility in the coming weeks. Given the perceived limited downside, selling put options to collect premium appears attractive, as this strategy profits if prices remain stable or increase. The high volatility also means option premiums are expensive, which presents both opportunities for sellers and higher costs for buyers.
We saw a similar pattern of tightening stocks and geopolitical risk in the third quarter of 2025, which preceded a rapid 15% price spike over the following month. The structural tightness in aluminum, especially when compared to the growing inventories we’ve recently seen in the copper market, strengthens the case for this upward bias. Therefore, positioning for price stability or a sudden increase seems more prudent than betting on a significant decline.
Start trading now – Click here to create your real VT Markets account
