Aluminum Prices Rise Amid Fears of Potential Supply Disruption Due to Iran Conflict Risks

Aluminum Prices Reach Highest Close Since April 2022 Amid Middle East Conflict

Aluminum prices rose for a third consecutive day due to ongoing supply disruptions from local producers in the Middle East. The conflict, which began on February 28, has forced output cuts at smelters in the region, accounting for approximately 9% of global output.

The Strait of Hormuz remains effectively shut, preventing shipments from transiting the choke point to reach global markets. This has led to a significant increase in premiums in the US and Europe, reflecting mounting concern among western buyers. BMI, a unit of Fitch Solutions Inc., estimates that the global market will move into a deeper deficit of 1.06 million tons this year.

Signs of a tightening market are emerging, with substantial orders to withdraw stockpiles from the London Metal Exchange's (LME) warehouse network. Mercuria Energy Group Ltd. was the main trader involved in requests for nearly 100,000 tons of aluminum from LME warehouses in Malaysia earlier this week.

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As a result, aluminum prices settled at the highest close since April 2022 on Wednesday, at $3,492.50 a ton on the LME at 10:55 a.m. in Shanghai. Other metals were mixed, with copper down 0.6% at $12,957.50. The market is expected to continue experiencing significant upside, with a potential move toward $3,700 a ton.