Aluminum price slips from multiyear high as market turmoil hits metals

Aluminum fell amid a broad selloff across financial markets, after earlier touching the highest in almost four years as escalating hostilities in the Middle East hit supplies from the region.

The metal rose as much as 2.8% to $3,544 a ton in London, before turning lower as a slump in equity markets and a stronger dollar created headwinds for industrial metals. Nickel pared earlier losses after four Indonesian plants halted output following a deadly landslide last month.

Aluminum jumped almost 10% last week, the most in three years, as the war curtailed shipments from the Persian Gulf, which accounts for about 9% of global supply. Buyers in the US rushed to secure alternative cargoes from Asia after at least two major smelters in the Middle East — one in Qatar and another in Bahrain — were forced to suspend deliveries.

In another sign of how the conflict is impacting the market, the cash to three-month aluminum spread hit $59 a ton on Monday, also the highest since 2022, indicating that spot demand is exceeding supply.

Crude oil spiked nearly 30% at one point on Monday as the conflict curbed more production, reflecting deepening worries around the duration of the war and its impact on the global economy. Broader financial markets tumbled as investors avoided risk assets.

A “prolonged war will hurt aluminum supplies further,” said Gao Yin, an analyst at Shuohe Asset Management Co. Many people are buying aluminum and selling other industrial metals in the near term, she added.

The US and Israel continued to strike Iran, which is still attacking Israel and Arab Gulf states regularly with drones and missiles. Tehran has said it can sustain the war at this level for at least six months. Iran chose Mojtaba Khamenei, the hardline son of the assassinated Ayatollah Ali Khamenei, as its new supreme leader, signaling it won’t back down in the war.

President Donald Trump criticized the choice. He also said in a social media post that strikes will continue “until they surrender or, more likely, completely collapse!”

Aluminum outlook

Aluminum on the London Metal Exchange may rise 28% on a yearly basis to $3,250 a ton in the first half due to the supply issues, Bloomberg Intelligence analyst Michelle Leung wrote in a note. The global deficit is set to widen to 1.4 million tons this year, the most since 2019, she added.

Alumina supplies originally set for Middle East smelters are being diverted to other countries, which has opened an arbitrage window to export into China for profits, Shandong Aize Business Information Consulting Co. said in a note on Friday. More alumina, a feedstock in the production of aluminum, is likely to be shipped into the country, it added.

Aluminum fell 1.5% to $3,396 by 10:56 a.m. local time on the LME. Copper was 0.7% lower at $12,779 a ton. Nickel was down 0.4%, after earlier losing as much as 3.7%.

Meanwhile, Singapore iron ore futures rose as much as 2.3% to $103.90 a ton, the highest in nearly five weeks, before trimming some gains. Prices of the steelmaking ingredient were supported by concerns that surging energy costs could upend supply chains.

Read More: US aluminum buyers hunt for alternatives as Iran war upends global supply