Aluminum futures rise on supply concerns and declining global inventories

Aluminum futures rose 0.40% to settle at 339.80 Indian rupees (about $3.57), supported by supply concerns and continued declines in inventories across the world's major metals exchanges.

Aluminum inventories in London Metal Exchange (LME) warehouses remained at their lowest level since 2022, while stocks registered with the Shanghai Futures Exchange (SHFE) fell 4.8%, reflecting continued strength in physical demand for the metal.

Geopolitical tensions support prices despite improving supply outlook

Prices found additional support after renewed geopolitical tensions following fresh US strikes on Iranian targets, which heightened concerns over disruptions to shipments passing through the Strait of Hormuz, one of the most important export routes for aluminum from the Gulf region.

However, expectations for improving regional supply conditions and easing tensions in the Middle East limited further gains.

On the production front, Emirates Global Aluminium (EGA) announced the restart of operations at its Al Taweelah alumina refinery after a shutdown that lasted around three and a half months.

The company expects the refinery to reach 50% of its operating capacity within days before returning to full technical capacity by the end of the year, a development that is expected to gradually increase global alumina supply.

Asian demand remains resilient

Demand indicators across Asia continued to point to solid consumption after Japanese buyers agreed to pay a premium of $395 per metric ton for aluminum shipments scheduled for delivery between July and September, signaling sustained regional demand.

Meanwhile, data from the International Aluminium Institute (IAI) showed that global primary aluminum production declined 1.7% year-over-year in May.

In contrast, China's aluminum output increased 1.7%, while exports also rose, supported by stronger prices in overseas markets.

Market outlook

Morgan Stanley expects the global aluminum market deficit to narrow during 2026 before shifting into surplus in 2027.

The bank added that demand driven by the continued expansion of data center construction is expected to remain one of the key drivers of aluminum consumption over the medium term.

Technical analysis

From a technical perspective, analysts said the market is witnessing short covering, with 338.5 Indian rupees (about $3.56) identified as a key support level, while the nearest resistance stands at 341.3 Indian rupees (about $3.59).