Aluminium extends gains on lingering fears over prolonged supply shock, China data support

Aluminium extended its gains on Tuesday as the market priced in a prolonged supply squeeze after Iranian strikes damaged key Gulf smelters, with stronger China factory data adding support.

The most-active aluminium contract on the Shanghai Futures Exchange gained 1.16% to 24,810 yuan ($3,594.14) a metric ton as of 0230 GMT.

The benchmark three-month aluminium on the London Metal Exchange rose 1.69% to $3,458.50 a ton.

Supply worries persisted as traders shifted their focus from temporary disruptions including the effective closure of the Strait of Hormuz, to concerns over a prolonged supply shock, which could persist even if war tensions ease.

This came after Iran’s attacks damaged two aluminium plants operated by Aluminium Bahrain and Emirates Global Aluminium in the Gulf region, accounting for 8% of global supply.

Neither company has provided an update on their operations.

The physical market is also flashing shortage, with aluminium inventories sitting in the LME warehouses falling since October last year.

Inventory was reported at 418,675 tons as of March 27, the lowest since July last year.

Meanwhile, China’s strong factory data, released on Tuesday, provided further support for the light metal used widely in transport, construction and packaging.

The official manufacturing purchasing managers’ index for March was 50.4, up from 39.0 a month ago and returned above the 50% mark separating growth from contraction, according to the National Bureau of Statistics.

Elsewhere on SHFE, copper rose 0.24%, zinc gained 0.49%, lead nudged 0.18% higher, nickel declined 0.35%, and tin climbed 1.62%.

Among other LME metals, copper ticked 0.18% up, zinc was up 0.19%, lead also gained 0.18%, nickel dipped 0.19%, and tin gained 0.30%.