LONDON: Aluminium prices hit four-year highs on Monday as fears of prolonged shipping disruptions in the Middle East due to the U.S.-Israeli war against Iran fuelled concerns about supplies of the metal.
Benchmark aluminium was down 1.7% at $3,386 a metric ton at 1105 GMT from an earlier $3,544 a ton, the highest since March 2022 when prices of the metal used in transport, construction and packaging hit a record $4,073.50.
Conflict in the Middle East has virtually shut the Strait of Hormuz through which aluminium produced in the region is shipped to the U.S. and Europe.
“The Europeans are particularly concerned, as the Gulf aluminum stoppage comes just as long-term supplier Mozal is going offline this month,” said Marex analyst Ed Meir.
“Some producers are looking to draw down stocks from outside the region so as to fulfill their obligations, but we suspect this is going to be difficult given the preponderance of Russian metal on the exchange (currently sanctioned) and generally low inventories otherwise.”
READ MORE: Aluminium resumes ascent, eyes best week in 18 months as Mideast war intensifies
In December, South32 said its 560,000-metric-ton-per-year capacity Mozal smelter would be placed on care and maintenance from mid-March, after talks with utilities and Mozambique’s government failed to yield a new power deal.
Worries about supplies have flipped the discount or contango for the cash aluminium contract over the three-month forward into a premium or backwardation. It climbed to $47.4 a ton on Friday, the highest since February 2022 and was last around $32 a ton.
Prices for aluminium along the maturity curve going out to 2036 are backwardated.
Elsewhere, the oil price surge has raised the prospect of slowing global growth and weaker demand for industrial metals, which also came under pressure from the stronger dollar.
Copper slipped 0.6% to $12,789 a ton, zinc climbed 1.8% to $3,357, lead was down 0.8% to $1,937, tin fell 3.3% to $48,426 and nickel ceded 0.6% to $17,360.
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