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Middle East Conflict Pushes Aluminum to 2-Year High
Plant Damage and Strait of Hormuz Closure Tighten Global Metal Markets
Aluminum registered its best month in nearly two years as the Middle East war disrupted supplies and damaged local production facilities, tightening the global market.
The lightweight metal advanced toward $3,500 a ton in London, translating into a monthly gain of 10.4%. That’s the most since April 2024 and contrasts with a broader downtrend for metals in March.
Commodities including base metals have been roiled by the conflict between the U.S., Israel and Iran. Around one-tenth of aluminum’s global production is concentrated in the Persian Gulf, with exports curtailed by the closure of the Strait of Hormuz. In addition, Iranian drones and missiles have struck plants run by Aluminium Bahrain BSC and Emirates Global Aluminium PJSC.
While both companies have yet to clarify the precise damage to their facilities, uncertainty remains about the impact on supply-demand balances.Ìý
Output from EGA’s Al-Taweelah plant, with a capacity of 1.6 million tons a year, can be written off for the long term, analyst Bernard Dahdah at Natixis SA wrote in a note. That could flip the market from a supply surplus of 200,000 tons to a deficit of about 1.3 million tons next year, he said.Ìý
Dahdah’s assessment is based on the assumption that if the plant has suffered significant damage, it’s likely it was forced into an uncontrolled shutdown, he said by phone. That would lead to the solidification of metal in the smelting circuit, which would cause lasting damage that would take at least a year to repair.
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Most other metals were higher March 31 on signs both the U.S. and Iran are open to ending the war soon. Iran President Masoud Pezeshkian reiterated his readiness to end the war amid guarantees. Earlier March 31, The Wall Street Journal reported President Donald Trump would be willing to exit the conflict even with the Strait of Hormuz largely closed.
Still, copper, zinc and nickel posted monthly declines as the war lifts energy costs and prompts warnings about global economic growth.
The hostilities in the Middle East have had the biggest direct impact on aluminum because of the region’s role as a major source of primary metal, most of which is exported. The disruptions have sent premiums soaring in other locations, including Japan, while prompting a pickup in orders for products from China, which dominates global output.
Three-month aluminum rose 1.9% to settle at $3,467 a ton on the London Metal Exchange. In other metals, copper gained 0.9% but was down more than 7% in March, the biggest monthly loss since June 2022.
