Supply worries drive aluminium prices to highest level

LONDON: Aluminium prices hit their highest in more than four years on Tuesday, as rising prices for the feedstock alumina added to persistent concerns about a tightening market amid reduced supply from Gulf producers.

Three-month aluminium on the London Metal Exchange rose 0.8 percent to USD3,677.50by 1600 GMT after hitting USD3,707.5, the highest since March 24, 2022.

The metal’s record high of USD4,073.5 was on March 7, 2022, when markets were grappling with the immediate fallout of Russia’s invasion of Ukraine.

Providing support to aluminium on Tuesday was a 5 percent rise in September alumina futures on the Shanghai Futures Exchange , which advanced to their highest since early May due to worries about supplies of raw material bauxite from Guinea.

Guinea, the world’s top bauxite producer, has been considering introducing export quotas for mining companies as shipping costs climb, squeezing the country’s revenue.

Guinea expects to finalise the new policy in June, Bloomberg News reported, citing an official.

These worries added to already reduced supply from producers in the Gulf amid the Iran war, which has kept the premium of the LME aluminium cash contract against the benchmark at USD73 a ton on Tuesday, indicating tightness for immediate supply.

The Middle East conflict has triggered the largest aluminium supply shock in at least 50 years, analysts at Citi said in a note last week, accelerating inventory drawdowns of around 3 million tons this year from already historically low levels and prompting strong futures buying.

In other LME metals, copper fell 0.3 percent to USD13,618.50 a ton. The global refined copper market was in a surplus of 396,000 tons in January-March, according to an industry body.

Zinc lost 0.3 percent to USD3,532, lead gained 0.2 percent to USD2,014, tin added 0.9 percent to USD54,600 and nickel rose 0.3 percent to USD18,975.

Earlier in the session, LME copper, zinc and tin hit their highest since mid-May, while lead touched the highest since late January.