Iran conflict stirs metal markets; aluminum prices hit highest level since January; Rio Tinto suspends supply negotiations with Japan.

```

Aluminum prices have risen due to market concerns that the key supply route, the Strait of Hormuz, in the major aluminum-producing countries of the Middle East, could be disrupted by regional conflicts. On Monday, aluminum prices on the London Metal Exchange (LME) rose 1.7%, reaching the highest level since January. The aluminum price term structure is also tightening, with spot contracts on the LME trading at a premium to forward contracts, indicating that spot demand is outstripping supply.

Over the weekend, the Middle East conflict escalated further, with the US and Israel launching strikes against Iran. Trump stated that US forces would continue bombing Iran until their objectives were achieved, demanding Iranian military and police surrender or "face certain death." Iran, in turn, carried out retaliatory attacks on several countries, including Saudi Arabia, the UAE, and Bahrain— all major aluminum producers.

The Strait of Hormuz, a vital maritime choke point off Iran’s coast, is an important channel for many large regional aluminum producers to export metals and import raw materials. Iran has declared the Strait of Hormuz closed and says it will attack any ships attempting to pass through. Industry insiders say if the transport of bauxite or alumina to supply Middle Eastern smelters is disrupted, it would pose a very significant risk.

This region accounts for about 9% of global aluminum smelting capacity, and aluminum prices are typically highly sensitive to the escalation of regional tensions:

The UAE’s largest aluminum producer—Emirates Global Aluminum (EGA)—operates smelters in Dubai and Abu Dhabi. The UAE confirmed over the weekend that debris from an aerial interception caused a fire at a berth in Dubai’s Jebel Ali port, only a few kilometers from EGA’s facilities.

Aluminium Bahrain owns one of the world’s largest single-site aluminum smelters.

Iran has about 790,000 tons of annual aluminum smelting capacity, of which 50,000 to 80,000 tons have already been shut down due to preventive measures during the conflict. If port activities are interrupted, more capacity may be shut down.

Rio Tinto has also suspended negotiations with Japanese customers over second-quarter aluminum supply. As one of the world’s major aluminum suppliers, Rio Tinto holds a key position thanks to its smelters in Canada and Australia. According to sources, the company initially offered to supply Japanese customers at a premium of $250 per ton over LME prices, but then withdrew the offer. This initial quote was already the highest since at least 2015.

Last week, nominal aluminum option trades totaling billions of dollars appeared in the market, believed to be bets on a potential severe shortage. The related call options focused on the April contract, with target price ranges of $3,300 to $3,500 per ton.

Since the beginning of this year, the metals market has experienced a turbulent start, driven by US President Trump’s aggressive foreign policy and concerns about the US dollar. London aluminum prices in late January hit their highest levels since 2022, and the US Midwest premium last month hit a historic high of over $1 per pound.

Citi analysts stated in a report that the aluminum market currently faces "two-way macro pulls": on one hand, Gulf tensions could push regional premiums higher in Europe and the US; on the other hand, stronger risk-aversion and the strengthening dollar create a "reverse drag." Aluminum smelters typically maintain about one to two weeks of alumina inventory, possibly more in logistically fragile areas, so immediate production risk is limited. More likely short-term impacts include higher war-risk premiums, increased freight costs, and additional shipping delays from the Gulf region.

The base metals market also faces broader concerns about the impact of escalating Middle East tensions on energy prices and the global economy. The sharp appreciation of the dollar puts pressure on dollar-denominated commodities, causing copper prices to give back early gains and eventually fall 1.8%.

Iron ore rose 0.8% in Singapore, closing at $99.10 per ton. The Middle East is an important iron ore pellet-producing region, accounting for about 13% of global share.

Risk Warning and DisclaimerThe market involves risks; investment requires caution. This article does not constitute personal investment advice and does not take into account individual users’ specific investment targets, financial conditions, or needs. Users should consider whether any opinions, views, or conclusions in this article fit their particular circumstances. Investing based on this article is at your own risk. ```