Aluminum Holds Gain

Aluminum futures in the UK hovered around $3,150 per tonne, holding their rebound from a four-month low of $3,085 reached earlier in July, amid rising supply risks and tightening inventories. The US and Iran have intensified attacks since an interim ceasefire deal signed last month collapsed, with shipping traffic in the Strait of Hormuz largely stalled, indicating little prospect of a return of aluminum supplies from the Persian Gulf, which accounts for around 9% of global supply. This has added to supply constraints, as China’s 45 million-ton production cap is set to become more restrictive this year. In addition, inventories in LME warehouses remained at their lowest levels since 2022, while Shanghai Futures Exchange stockpiles continued to decline, pointing to sustained demand. Meanwhile, the restart of Emirates Global Aluminium’s Al Taweelah alumina refinery following a three-and-a-half-month outage could provide some relief.

Aluminum futures in the UK were at $3,160 per tonne, holding most of their rebound from the four-month low of $3,085 from earlier in July amid fresh threats to supply. US President Trump stated he would reinstate the blockade of commercial vessels out of the Strait of Hormuz following the exchange of strikes with Iran. The move dented prospect that supply from the key region would be restored. Pre-war exports from the GCC were responsible for 9% of global aluminum consumption. On top of that, the surge in natural gas prices due to the shortage from the Middle East lifted operating costs for power-hungry aluminum smelters in Europe and Asia. This added to constraints as the 45 million ton supply cap for China was due to become restricting this year. Consequently, stocks of primary aluminum at the LME sank by 43% tonnes this year to 285,000 tonnes. Also, industry giant Macquarie forecasted a global aluminum shortfall of around 930,000 tonnes.

Aluminum futures in the UK climbed to $3,200 per tonne, extending the rebound from a more than four-month low amid declining inventories and expectations of a shortage. Drawdowns from LME warehouses in recent weeks pushed total stocks below 300,000 tonnes for the first time since 2022, highlighting tight near-term availability. Although the resumption of trade through the Strait of Hormuz and announcements of smelter restarts in the Middle East had raised expectations of additional supply, some analysts noted that supply from the region may take longer than anticipated to reach the market. The aluminum market is also expected to see a deficit this year, with Macquarie forecasting a shortfall of around 930,000 tonnes. Prices were further supported by a softer US dollar after a weak US jobs report reduced expectations of an imminent rate hike, improving the appeal of dollar-denominated commodities.