Aluminum Extends Decline

Aluminum futures in the UK fell to around $3,270 per tonne, retreating further from a seven-week high, as concerns over Gulf supply eased after Emirates Global Aluminium announced plans to restore production at its Al Taweelah smelter. The smelter, which was shut down following an Iranian strike during the early stages of the war, is currently operating at only 18% of capacity and is expected to return to prior output levels in early 2027. This will improve supply prospects from a region that accounted for around 10% of global production before the conflict. Prices had jumped recently amid lower feedstock production at Norsk Hydro’s plant in Brazil, which added to supply concerns as uncertainty persisted over a deal that could reopen the Strait of Hormuz, a key export route for regional smelters. Meanwhile, the owners of Australia’s largest aluminum smelter secured a $1.8 billion government bailout, allowing operations to continue and further boosting supply prospects.

Aluminum futures in the UK rose to $3,380 per tonne in August, the highest in nearly two months, on declining supply from key producers. The Alunorte plant in Brazil, the world's largest alumina plant outside of China, was forced to cut operations to half capacity amid the lack of natural gas from its supplier. The developments deepened the detriment to Norsk Hydro, the main client for Alunorte. The firm had already declared two force majeures on aluminum sales after its joint Qatari venture Qatalum plant was forced to shut off production on natural gas shortages after Iran had damaged energy and metallurgy infrastructure in the Middle East. Supply from nations in the Persian Gulf has been hampered since the start of the US-Iran conflict in March, due to both direct destruction of plants and blockades on trade routes for exports. The region was responsible for around 10% of global production pre-war. Still, futures are below four-year peaks from this year on softening Chinese demand.

Aluminum futures in the UK rose to around $3,320 per tonne, the highest level in seven weeks, amid ongoing supply constraints and weaker production. Output outside China fell 6.7% year-on-year in July, mainly due to reduced operating rates at several Middle Eastern smelters. These pressures were compounded by China’s 45 million-ton production cap, which is expected to become more restrictive this year. Geopolitical tensions have also prompted consumers to draw down exchange inventories, with LME stocks falling to their lowest level this century. In addition, Alcoa Corp. cut its production forecast following operational issues at an Australian refinery. However, some of these supply concerns could be partly offset by planned capacity restarts and expansion progress among some producers, including the restart of the Slovalco smelter in Slovakia in Q4 2026 and the Missouri smelter by year-end. Emirates Global Aluminium has also continued restoring production at its Al Taweelah facility.