LONDON: Aluminium prices hit their highest level in almost four years on Thursday on investor worries of tighter supply to Europe and other regions as the Middle East conflict disrupts shipments via the Strait of Hormuz.
Benchmark three-month aluminium on the London Metal Exchange rose 1percent to USD3,492 a metric ton in official open-outcry trading after touching USD3,546.50, its highest since late March 2022.
The war in the Middle East has affected deliveries from aluminium producers in the region that account for around 9percent of global aluminium supply and sparked fears of disrupted imports of raw materials such as alumina to these producers via the Strait of Hormuz. Easing some of the immediate worries, Norsk Hydro said on Thursday its Qatalum aluminium smelter in Qatar was halting the curtailment it began last week and would maintain production at around 60percent capacity with reduced gas supplies.
Hydro added that it was working to mitigate the consequences of the curtailment and shipping disruptions. Another concern for aluminium producers is rising oil prices as energy can amount to 40percent to 45percent of aluminium smelting costs in some regions.
The war in the Middle East is creating the biggest oil supply disruption in history, the International Energy Agency said on Thursday.
Contributing to the scale of the price moves in aluminium is the current short gamma market profile, said Alastair Munro, senior base metals strategist at broker Marex, referring to a situation when option dealers sell during market declines and purchase during rallies.
“These option shorts are contributing to some of the violent intraday swings too,” he added. Among other LME metals, copper fell 0.3percent to USD13,003.50 a ton in official activity. Top metals consumer China “has certainly not been active on the copper bid”, Munro said. Zinc climbed 0.2percent to USD3,314, lead rose 0.3percent to USD1,942, tin gained 0.9percent to USD50,100 and nickel was steady at USD17,700.
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