Aluminum Extends Decline

Aluminum futures in the UK fell toward $3,530 per tonne, extending their retreat from an over four-year high despite renewed concerns over supply disruptions from the Persian Gulf, a region that accounts for roughly 9% of global output. Iran blocked the Strait of Hormuz again only hours after reopening it, blaming the US for its ongoing blockade of Iranian ports. Beyond restricting shipping flows through one of the world’s most important trade routes, the conflict has also directly affected production capacity. Key refineries in the UAE and Bahrain were damaged after being hit by Iranian strikes. Analysts noted that supply regional constraints could persist for months even if hostilities end soon, as restoring damaged smelting and refining capacity is expected to take significant time. Emirates Global Aluminium, the region’s largest producer, said it will take at least a year to restore production.

Aluminum futures in the UK sank to $3,550 per tonne from the three-year high of $3,670 on April 16th, as signals of resorted vessel flows through the Strait of Hormuz improved the outlook form key suppliers in the region. Iranian authorities stated that commercial vessels are now free to navigate the chokepoint following ongoing talks with the US, improving the outlook for exports from major producers in the region. Before the start of the conflict in March, aluminum output from the UAE, Qatar, and Bahrain was responsible for around 9% of global supply. Production prospects also improved elsewhere as the pullback in energy prices from the developments are likely to improve margins for Asian and European smelters. Still, output is unlikely to immediately rebound to pre-war levels as facilities in Qatar and Bahrain faced damage, while power prices remained higher this year.

Aluminum futures in the UK climbed above $3,650 per tonne, the highest since March 2022, amid persistent concerns over a supply shortfall. Wood Mackenzie projects a global deficit of up to 4 million metric tons this year, underscoring a tight market. Emirates Global Aluminium, the Middle East’s largest producer, has declared force majeure on some deliveries after halting operations at its Al Taweelah smelter due to Iranian strikes. Alba, the largest single-site aluminum smelter outside China, was also hit, although the extent of the damage remains unclear. Alba had already reduced output prior to the attack, as had Qatar Aluminium amid power shortages. The Persian Gulf accounts for about 9% of global supply, serving Europe, Asia, and the US. Even before the attack, the closure of the Strait of Hormuz had already put significant strain on the region’s access to vital inputs. Meanwhile, Chinese firms have signalled readiness to step in with alternative supplies for overseas customers.