Aluminium hits four-year high on renewed Middle East supply risks

LONDON: Aluminium prices soared to their highest point in more than four years on Monday as Middle East supply risks escalated after the US and Iran traded military strikes, traders said.

Benchmark aluminium on the London Metal Exchange traded 0.5percent higher at USD3,685 a metric ton in official rings. Earlier, it touched USD3,707.50 to match a level hit on May 26 for its highest point since March 2022.

The Middle East houses 9percent of global smelting capacity for aluminium. The closure of the Strait of Hormuz has restricted aluminium exports from the region and limited imports of the raw materials needed to smelt the metal used to manufacture cars, aeroplanes, beer cans and building materials.

Analysts expect a large aluminium market deficit this year, with some floating numbers above 2 million tons. “Aluminium remains the standout story,” Britannia Global Markets said in a note. “The extreme backwardation highlights the severity of the squeeze.” Backwardation refers to the premium for nearby LME aluminium contracts against those along the maturity curve.

The premium for the cash aluminium contract over a three-month forward surged to 19-year highs above USD100 a ton on Friday. Elsewhere, copper prices are ticking up as markets price in tight markets outside the US, which has over the last year sucked in vast amounts of copper due to expectations for tariffs on imports.

The US is expected to decide by late June whether to impose tariffs on copper metal imports.

Total copper stocks in warehouses registered with Comex HG-STX-COMEX at 640,181 short tons or 580,762 metric tons are up more than 550percent since US President Donald Trump in February last year ordered an investigation of copper import tariffs. Expectations of weak mine supply growth have also helped reinforce elevated copper prices.

Supporting industrial metals overall was expanding manufacturing activity in top consumer China for the sixth consecutive month. Copper was up 1.5percent at USD13,840 a ton, zinc gained 1percent to USD3,576, lead firmed 0.2 percent to USD2,021, tin advanced 2percent to USD56,590 and nickel was little changed at USD19,275.