Supply concerns push aluminum prices to over four-year highs

Aluminum prices climbed to their highest levels in more than four years on Tuesday, driven by rising alumina prices — the key raw material — alongside persistent concerns over tightening supply due to reduced shipments from Gulf producers.

Three-month aluminum on the London Metal Exchange rose 0.8% to $3,680 per ton during official trading after touching $3,707.5, its highest level since March 24, 2022.

The metal had previously reached a record high of $4,073.5 per ton on March 7, 2022, when markets were dealing with the immediate fallout from Russia’s invasion of Ukraine.

The main support for aluminum prices on Tuesday came from a 5% jump in September alumina futures on the Shanghai Futures Exchange, which climbed to their highest levels since early May amid concerns over bauxite supplies from Guinea.

Guinea, the world’s largest producer of bauxite, is considering imposing export quotas on mining companies as rising shipping costs weigh on state revenues. Bloomberg reported, citing a government official, that Guinea expects to finalize the new policy during June.

These concerns added to pressure already stemming from declining supplies from producers in the Gulf region due to the war with Iran, which kept the premium for cash aluminum contracts on the London Metal Exchange above the benchmark price at $71 per ton last week, signaling tight spot supply conditions.

Analysts at Citigroup said in a note last week that the Middle East conflict has caused the biggest shock to aluminum supplies in at least 50 years, accelerating inventory drawdowns by around 3 million tons this year, despite stocks already being at historically low levels, while also prompting investors to intensify purchases of futures contracts.

In other metals trading on the London Metal Exchange, copper fell 0.4% to $13,610 per ton during official trading. According to data from an industry body, the global refined copper market recorded a surplus of 396,000 tons during the January-March period.

Zinc also rose 1% to $3,577 per ton, lead gained 0.2% to $2,015, tin climbed 0.5% to $54,450, while nickel fell 0.8% to $18,760 per ton.

Earlier in the session, copper, zinc, and tin prices on the London Metal Exchange reached their highest levels since mid-May, while lead touched its highest level since late January.