Base Metals Prices Decline Amid Uncertainty Over US-Iran Diplomatic Developments

Global Economic Concerns Weigh on Industrial Metals

Industrial metals declined on Wednesday as investors remained concerned about global economic growth due to mixed signals about prospects for a US-Iran deal to end the war. US President Donald Trump said he was "not satisfied" with negotiations with Iran, damping expectations for an imminent accord. This development comes as the US denied an Iranian media report on a draft interim deal that said traffic through the Strait of Hormuz could return to normal within a month of it coming into effect.

Metals, including copper, have traded in a tight range in the past two weeks as investors monitor the progress toward a ceasefire deal. The absence of a deal risks dragging the global economy into a slowdown, while an end to the conflict would ease concerns about a prolonged hit to global growth that would crimp metals demand from manufacturers. Meanwhile, copper traders are once again scouring the world for metal to send to the US, as renewed speculation about import tariffs revives a trade that's upended the $300 billion-a-year market.

Aluminum Remains Best Performing Base Metal

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Aluminum slipped along with other industrial metals, but remains the best performing base metal on the London Metal Exchange since the Iran war began in late February. The light metal has risen more than 15% as the effective blockage of Hormuz disrupts metal supply from the Middle East, which accounts for nearly one-tenth of global supply. Damages at two large smelters by Iranian drones and missiles in the region added further upside to prices.

According to Charvi Trivedi, principal analyst at Wood Mackenzie, the Middle East is on track to lose up to 3.5 million tons of aluminum production this year, and the gap left behind is too large for the rest of the world to fill. While Chinese and Indonesian smelters are accelerating output to capture lost market share, global supply is on track to contract by nearly 3% this year, according to Trivedi.

Market Performance

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Note: The price of aluminum is not specified in the article, so it has been left out of the table.