Aluminum Eases from 8-Week High

Aluminum futures in the UK fell to $3,200 per tonne from the eight-week high of $3,360 on August 11th, as higher supply from China offset the disruption from the war in the Middle East. Exports of aluminum from China, the world's top producer, surged by 18.7% in the year to July. The country has stepped up exports as muted demand allowed producers to ship metal despite Beijing's output cap of 45 million tons, easing shortages from the Middle East due to the war in Iran. 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. This added to detriment to its client Norsk Hydro, which 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. LNG supply from the Middle East, essential for aluminum refining, has been scarce due to tanker blockades from the US and Iran.

Aluminum futures in the UK fell toward $3,200 per tonne, retreating from a seven-week high hit on August 11, amid easing supply concerns. Emirates Global Aluminium set out plans to restore production at its Al Taweelah smelter, which was shut down following an Iranian strike during the early stages of the war. The smelter is operating at 18% of capacity and is expected to return to prewar output levels in Q1 2027. This will improve the supply outlook from a region that accounted for 10% of global production before the conflict. Prices had risen recently as Norsk Hydro cut output at its Alunorte refinery in Brazil after its natural gas supplier reported disruptions, while uncertainty persisted over a deal that could reopen the Strait of Hormuz, a key export route for regional smelters. Meanwhile, Australia’s largest aluminium smelter, Tomago, secured a A$2.5 billion government support package to ensure its continued operation beyond 2028, 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.