The aluminium market has benefited from a series of production cuts carried out by smelters globally, including Alcoa, Rusal, and Rio Tinto. Prices have also been boosted as inventories fell to a multi-month low. The improved outlook has boosted shares of Alcoa and Century Aluminium. More importantly, aluminium prices could remain strong as there is likely to be a supply deficit for a prolonged period of time.

Alcoa and Century Aluminium shares have been among the top performers this year. Year to date, Alcoa shares have gained more than 62% while Century Aluminium is up more than 80%. The gains have been partly driven by the changing market environment, which has boosted aluminium prices.

The rally in aluminium prices has been sparked by growing conjecture that the aluminium market could face a huge supply deficit in the short- to mid-term as inventories at the warehouses overseen by the London Metal Exchange (LME) have fallen to a multi-month low.

Rusal, Alcoa, and Rio Tinto have been cutting production. These production cuts have allowed the market to become more fundamentally balanced, ending a glut accumulated over the years due to higher production and weakness in demand. The aluminium market recorded a deficit of 726,000 tons last year, and Alcoa now anticipates a wider-than-expected deficit of 930,000 tons this year.

While production cuts have helped the aluminium market, the latest rally has been driven by a decline in inventory levels at the LME. On Monday, the metal entered a bull market, crossing $2,000 per ton mark, or about 20% above its year-to-date closing low of $1,677. This low was recorded on Feb. 3 as inventories at LME-administered warehouses fell 9.4% year to date to below 5 million tons.

As of July 21, the stockpile tracked by LME was at 4.94 million tons, the lowest level since Sep. 12, 2012, according to data provided by Bloomberg. It's not just that the inventories have been shrinking, either; the waiting period to withdraw aluminium from LME-registered warehouses is also getting longer due to shrinking supplies. Since May 2014, the waiting time to withdraw aluminium from LME's biggest warehouse has stretched by 58 days.