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Learn about LME Aluminium Premium Prices through AlToolz

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We know about the LME aluminium contracts and how they are traded in LME. We have already discussed how AlToolz is offering LME Official Prices for Aluminium (High grade primary aluminium) and Aluminium Alloy (A380.1, 226 or AD12.1 aluminium alloyContracts as a part of its premium services. Each of the reference prices published by the London Metal Exchange is derived directly from trading and provides transparent pricing for the global metals market.

However, all-in aluminium price is not only determined by LME Official Prices. Premiums play a significant part of the total aluminium price. As the LME glossary says premium is a one-off payment, made at the outset, to purchase an option which in this case is the physical metal. So it is the price that is paid to get physical delivery of aluminium. It includes the cost of freight and handling to ship aluminium from LME warehouses to other locations. LME Aluminium Premiums are newly launched contracts designed by LME to help the physical industry hedge the “Premium” portion of the ‘all-in’ aluminium price. AlToolz also lets you access the LME aluminium premium prices.


Aluminium premiums are mostly driven by demand, supply, LME cash price, freight, warehouse rent, cancelled warrants and trading costs and last but not the least, the gap between demand and supply in the market. When markets are tight and the metal is not available to buyers, premiums tend to increase and tend to decrease when markets are oversupplied with metal.

Premiums are quoted over and above the LME cash price and vary according to the locations in which the metal is delivered. Aluminium premium is normally quoted for three benchmark locations, Europe, Midwest US and Japan. However, the normal equation between aluminium premium and demand supply seems to be disrupted in last few years and the premiums are becoming a volatile component in the all-in aluminium prices.

The volatility of LME aluminium prices and the premiums has become the most crucial part of the aluminium market after the global financial crisis. This has completely transformed the price structure of aluminium. That new structure is now being passed through the entire value chain. This new price structure makes the end users who fall at the end of the value chain, to incorporate the aluminium premium in their supply contracts.

LME designs the aluminium premiums contracts in a way so that it works alongside the ‘parent’ LME Aluminium contract. They allow market participants to hedge the all-in price of aluminium and physically deliver or receive premium aluminium warrants in non-queued LME premium warehouses.

LME Aluminium Premiums are monthly contracts and the four regional premium contracts work alongside the parent LME Aluminium contract. It creates a balance between global liquidity and regional flexibility.

The LME aluminium premiums contracts work as a transparent tool to discover supply-and-demand-driven premium prices in four regions.  Based on the closing prices, market participants can derive a reference premium price for the given regions.

LME offers the following four regional premium contracts for trading:

• LME Aluminium US Premium 
• LME Aluminium West-Europe Premium
• LME Aluminium East-Asia Premium
• LME Aluminium South-East Asia Premium

Since, a trader can trade both the existing LME Aluminium parent contract and the LME Aluminium Premiums contracts under LME; it gives the market participants an opportunity to access LME’s liquid global market as well as the regional reference prices. This way, traders can insure the complete risk of regional and market dynamics.


Under AlToolz, besides providing the LME Aluminium and Aluminium Alloy prices,  AlCircle provides Daily LME Aluminium Premium Closing Prices as updated on a one-day delayed basis.  Users can log-in to see the prices and understand the aluminium market dynamics. They can also get access to the archive prices.  For more detailed information regarding trading in LME Aluminium Contracts and LME Premium Contracts, users can visit the LME website.

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