Aluminum Moves Lower

Aluminum futures in the UK held near $3,250 per ton, as prospects of improving supply and a stronger US dollar weighed on prices. Several smelters are working to restart and bring previously idled capacity back online, while others are moving ahead with expansion plans. Rising Chinese exports are also helping to offset some of the supply losses from the Gulf, with aluminum exports climbing 17.2% year on year in August. The increase comes amid tepid domestic demand and elevated inventories, allowing more metal to flow into overseas markets. The Gulf accounted for roughly 10% of global aluminum supply before the war, but disruptions to shipping through the Strait of Hormuz have severely constrained regional exports, while GCC production fell 44% year on year in July. Meanwhile, hawkish comments from several Federal Reserve officials sent the US dollar higher, making dollar-denominated commodities expensive for global buyers.

Aluminum futures in the UK rose to $3,290 per ton, extending 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. Traders appeared to shrug off a hawkish rate hike by the Federal Reserve, which sent the US dollar higher. 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.