Aluminum Rises to Over 3-Year High

Aluminum futures in the UK rose to $3,280 per ton, holding the rebound from a two-week low, underpinned by tight supply conditions. The Middle East war has disrupted supply from the region, with GCC production falling 44% year-on-year in July. The region accounted for around 10% of global aluminum production before the conflict. LME inventories remained close to a 36-year low, while SHFE stockpiles continued to fall, pointing to limited availability in the physical market. However, the supply outlook could improve as several smelters restart and ramp up previously curtailed capacity, while others pursue expansion projects. Increased Chinese exports could also help ease supply shortages from the Gulf, with aluminum exports climbing 17.2% year-on-year in August. Capping gains, however, the US dollar remained firm amid a hawkish Federal Reserve stance. A strong US dollar typically weighs on dollar-denominated commodities by making them more expensive for global buyers.

Aluminum futures in the UK hovered around $3,250 per tonne, holding their retreat from a two-month high as a rising US dollar weighed on dollar-priced commodities. The greenback firmed up as stubbornly hot US inflation prompted traders to increase bets on a Federal Reserve rate hike later this week. Still, aluminum remain underpinned by tight supply conditions. The ongoing US-Iran conflict has disrupted aluminum supply from the Middle East, with GCC production declining 44% year-on-year in July. The region was responsible for around 10% of global production before the war. LME inventories remained close to a 36-year low, while SHFE stockpiles continued to fall, pointing to limited availability in the physical market. However, the supply outlook could improve, with several smelters restarting and ramping up previously curtailed capacity, as well as pursuing expansion projects. Rising aluminum exports from top producer China could also help ease supply constraints and limit price gains.

Aluminum futures in the UK were at $3,340 per tonne, their highest level in four weeks, supported by persistent supply tightness and shrinking inventories. The ongoing US-Iran conflict has crimped aluminum flows from the Middle East, with GCC output falling 44% year-on-year in July. LME inventories remained near a 36-year low, while SHFE inventories fell 3% from the previous week, underscoring tight conditions in the physical market. Meanwhile, the Alunorte plant in Brazil, the world’s largest alumina refinery outside China, temporarily cut production to 50% of capacity in August, although output was subsequently restored to full capacity following a temporary terminal access agreement with its gas supplier. Some of these supply pressures could also be partly eased by planned capacity restarts and expansion projects among several producers, as well as rising exports from China, the world’s largest producer.