Aluminum Prices Projected to Rise 10% Amid Global Supply Chain Disruptions

Global Aluminum Prices Surge Amid Middle East Conflict

The global aluminum market is heading for its biggest monthly gain in nearly two years, driven by disruptions to supplies and damage to local production facilities in the Middle East. The light-weight metal is advancing towards $3,500 a ton in London, on course for a monthly gain of 10%.

This marked increase bucks a broader downtrend for metals in March, as commodities including base metals have been impacted by the conflict between the US, Israel, and Iran. The Persian Gulf region, which accounts for around a tenth of global aluminum production, has seen exports choked off by the closure of the Strait of Hormuz. Additionally, Iranian drones and missiles have struck plants run by Aluminium Bahrain BSC and Emirates Global Aluminium PJSC.

The damage to these facilities is yet to be clarified, but analysts are warning of potential market imbalances. Bernard Dadhah, an analyst at Natixis SA, has suggested that the Al-Taweelah plant, which has a capacity of 1.6 million tons a year, may be written off for the long term. This could flip the market from a supply surplus of 200,000 tons to a deficit of about 1.3 million tons next year.

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The conflict in the Middle East has had a significant impact on the global aluminum market, primarily due to the region's role as a major source of primary metal. The disruptions have sent premiums soaring in other locations, including Japan, while prompting a pick-up in orders for products from China, which dominates global output.

As a result, three-month aluminum prices are 1.8% higher at $3,461.50 a ton on the London Metal Exchange at 10:44 a.m. in Singapore. Meanwhile, copper prices remain little changed at $12,242 a ton, down more than 8% in March and on pace for the biggest monthly loss since June 2022.