Aluminium prices on the London Metal Exchange have reached their highest levels since March 2022, trading at $3,685 a metric ton, driven by supply disruptions in the Middle East.
The closure of the Strait of Hormuz has severely restricted aluminium exports and imports of essential raw materials, leading to a market deficit expected to exceed 2 million tons this year.
Analysts highlight the extreme backwardation in the market, with cash aluminium contracts commanding a premium over three-month forwards, reaching 19-year highs above $100 a ton.
“Aluminium remains the standout story. The extreme backwardation highlights the severity of the squeeze.”
Britannia Global Markets
Meanwhile, copper prices are also on the rise due to tight market conditions outside the U.S. and potential tariffs on copper imports.
Copper stocks in Comex warehouses have surged over 550% since last year, reflecting ongoing supply concerns.
Supporting the industrial metals market is the continued expansion of manufacturing activity in China, the world's largest consumer.
Background
The Middle East accounts for 9% of global aluminium smelting capacity, making it a critical region for the metal's supply chain. The current geopolitical tensions and logistical challenges have exacerbated supply issues, impacting global markets.
As the market grapples with these supply challenges, stakeholders will be closely monitoring geopolitical developments and their impact on global aluminium and copper markets.
