LONDON: Aluminium prices jumped to three-month highs on Monday as U.S. airstrikes on Iran’s nuclear facilities raised the prospect of higher energy prices and disruptions to shipments of the metal from the Middle East.
Energy can amount to 40-45% of aluminium smelting costs in some regions.
Investor fears of an escalation in Middle East conflict and disruption to oil and gas supplies escalated as President Donald Trump warned that the U.S. could attack other targets unless a peace deal can be agreed with Israel.
Benchmark aluminium was up 1.3% at $2,584 a metric ton in official rings after touching its highest since March 21 at $2,654.50.
“Middle East countries produce almost 9% of the world’s aluminum,” said Alastair Munro, senior base metals strategist at broker Marex. “If the Strait of Hormuz is blocked, that could affect shipments.”
Global supplies will be further disrupted if Iran shuts the Strait of Hormuz, analysts say, because Middle East production relies on imports of aluminium raw materials bauxite and alumina.
Elsewhere, the LME market was focused on large holdings of cash copper contracts and warrants - title documents conferring ownership - and premiums for near-term copper contracts.
Aluminium outperforms copper on energy cost concerns amid US-Iran tensions
LME data shows that one company holds a dominant position of more than 90% in copper warrants and cash contracts.
The premium or backwardation for the cash copper contract over the three-month forward soared to $340 a ton on Monday, the highest since October 2022. The premium stood at only $3 a month ago.
Part of the problem is the slide in copper inventories in LME-approved warehouses. Much of the copper stored on the LME has been shipped to the U.S., where prices soared after President Trump ordered an investigation into possible tariffs on copper imports.
The London exchange responded on Friday by imposing restrictions on holders of large positions in near-term contracts.
Three-month copper was up 0.1% at $9,641 a ton, lead rose 0.8% to $2,009, tin slipped 0.2% to $32,615 and nickel retreated 1.5% to $14,785.
Zinc, production of which requires large amounts of energy, was up 1.8% at $2,677 a ton.
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