Aluminum price climbs as Asia premium offer spikes

Aluminum continued to climb on Wednesday as supply disruptions in the Middle East kept prices of the metal elevated near levels last seen in 2022.

Three-month futures in London rose 0.6% to above $3,400 a tonne, approaching the four-year peak hit on Monday. This extends the metal’s gains over the past week to 4%.

The aluminum rally has been ignited by the war in the Middle East. The region accounts for approximately 9% of the global output, but an effective closure of the Strait of Hormuz meant those supplies could not reach the market.

Two of the region’s most prominent smelters, one in Qatar and another in Bahrain, had to declare force majeure on shipments of their finished metal product as a result.

Highlighting the significant disruptions to the aluminum market, Rio Tinto earlier offered to supply the metal at a premium of $350 a tonne to Japanese buyers for second-quarter shipments.

This represents a 40% increase over its previous proposal, and would be the highest aluminum premium paid by Japanese buyers since 2015.

Japan is a major importer of aluminum, and the premiums for primary metal shipments it agrees to pay each quarter over the London Metal Exchange (LME) cash price set the benchmark for the region.

“Behind the higher offer is stronger European and US premiums and rising freight and insurance costs,” Reuters said earlier, citing sources.

While prices on the LME surged, the premium over the Shanghai Futures Exchange has also risen, now at the highest since April 2022. This could lure more exports from China, easing tightness.

Chinese exports have been resilient this year due to rising demand from emerging sectors such as artificial intelligence and solar panels, an industry participant told Bloomberg, estimating that March shipments could rise more than 5% from a year ago.