Aluminum rallies to four-year high on Middle East supply concerns

Aluminum prices climbed on Thursday to their highest levels in nearly four years as concerns intensified over potential supply constraints to Europe and other regions due to shipping disruptions through the Strait of Hormuz amid the Middle East conflict.

The three-month aluminum contract on the London Metal Exchange rose 0.6% to $3,478.50 per metric ton after touching $3,546.5, its highest level since around March 2022.

Shipments from aluminum producers in the region—who account for roughly 9% of global supply—have been affected, raising fears that raw materials such as alumina could also face disruptions as they pass through the strait to reach these producers.

In an effort to ease some immediate concerns, Norsk Hydro announced that the Qatalum aluminum smelter in Qatar would end the curtailment that began last week and continue operating at about 60% of its production capacity despite reduced gas supplies. The company added that it is working to mitigate the effects of the curtailment and shipping disruptions.

Rising oil prices are another major concern for aluminum producers, as energy can account for 40% to 45% of aluminum smelting costs in some regions. The International Energy Agency confirmed that the Middle East war is causing the largest disruption to oil supplies in history.

Alastair Munro, senior base metals strategist at Marex, said current volatility in aluminum prices is being amplified by a short-gamma market structure in options trading, where market makers sell when prices fall and buy when they rise, increasing intraday swings.

Among other metals on the London Metal Exchange, copper slipped 0.1% to $13,032 per ton, zinc was steady at $3,310.50, lead rose 0.4% to $1,943.50, tin gained 0.8% to $49,320, and nickel edged up 0.1% to $17,710.