Foreign media reported on May 16 that aluminum inventories in London Metal Exchange (LME)-registered warehouses have approached their lowest levels in 17 years.

LME aluminium inventories could fall further in the coming days and weeks as more aluminium leaves LME warehouses for supply-shortened Europe

In Europe, record-high electricity prices have pushed up the cost of producing metals, especially power-intensive aluminium. Western Europe accounts for about 10% of global aluminum consumption of 70 million tons.

Aluminium supply risks remain high, Citigroup commodities analyst Max Layton said in a research note. About 1.5 million to 2 million tonnes of aluminium capacity in Europe and Russia are at risk of closure in the next 3 to 12 months.

Supply shortages in Europe have led to the withdrawal of LME aluminium stocks. LME aluminium inventories have fallen 72% since March last year to 532,500 tonnes, the lowest since November 2005. Even more worrying is that only 260,075 tons of aluminum inventories are available for the market, a record low.

Aluminium futures on the LME extended Friday's gains on Monday as the number of aluminium warehouse receipts fell to an all-time low, ING analysts noted, also reflecting tight supply conditions in aluminium markets outside China. In China, supply growth outpaced demand, as demand weakened due to the outbreak. China's primary aluminium production hit a record high of 3.36 million tonnes in April, as previously imposed power restrictions eased, allowing Chinese smelters to ramp up production.

Benchmark three-month aluminium on the LME rose 1.2% to $2,822 a tonne, touched a one-week high of $2,865 in early trade.

The discount on the LME three-month aluminium to spot-month aluminium narrowed to $26.5 a tonne from $36 a week earlier, amid concerns about tight LME aluminium inventories.

In Europe, consumers are paying a premium of as much as $615 a tonne for their spot aluminium, which is also an all-time high.