Aluminum Prices Surge to 4-Year High Amid Middle East Tensions

Global Aluminum Prices Reach Four-Year High Amid US-Iran Tensions

The global aluminum market saw a significant surge on Monday, with prices reaching a four-year high, as US President Donald Trump's blockade of the Strait of Hormuz threatened further disruptions to shipments. The metal rose as much as 2% in London, reigniting a rally driven by supply shortages due to the ongoing Middle East war.

The US military announced that it would implement the blockade at 10 a.m. New York time on Monday, which applies to all vessels entering or departing Iranian ports or coastal areas. The Middle East accounts for approximately 9% of global aluminum output, with Emirates Global Aluminium PJSC, the region's top producer of the metal, invoking force majeure clauses on at least some deliveries after one of its smelters was put out of action by an Iranian attack earlier this month.

While most other base metals were flat or weaker, the failure of US-Iran negotiations in Pakistan at the weekend led to a decline in market optimism. Metals are broadly at risk from weaker demand due to soaring energy prices, which are hurting the global economy. However, aluminum has gained due to the supply crunch arising from the war.

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The aluminum market is experiencing significant stress, with a ballooning backwardation on the London Metal Exchange. The spread on cash contracts over those for delivery in three months jumped 37% from Friday to reach $91.50 a ton, the highest since 2007. This points to a growing call on immediate deliveries as buyers hunt for alternative sources of the metal.

Aluminum prices rose to $3,545.50 a ton on the London Metal Exchange as of 2:05 p.m. Shanghai time, while copper added 0.1% to $12,857. Zinc prices remained stable, and iron ore futures climbed 0.8% in Singapore.