Middle East conflict disrupts 9% of global production: LME aluminum prices surge to a four-year high, supply crisis intensifies

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The Iran war continues to disrupt global aluminum supply chains, profoundly reshaping the supply-demand structure of the global aluminum market.

London Metal Exchange (LME) aluminum prices rose 0.5% in early trading Wednesday to $3,426.50 per ton, hovering near the four-year high reached earlier this week. The Middle East contributes about 9% of global aluminum production, and the conflict has led to significant production cuts in the region. Meanwhile, the Strait of Hormuz has effectively become blockaded, with both inbound raw materials and outbound finished goods facing obstacles. LME aluminum prices have risen over 9% this month, and surged 27% over the past year.

Signals of tight supply are emerging from multiple dimensions. On Tuesday, Rio Tinto offered Japanese buyers a second-quarter aluminum supply premium of $350 per ton. According to media citing informed sources, this will be the highest quarterly premium level since 2015.

The Trump administration's shifting stance on the conflict has kept commodities markets volatile this week. On Tuesday, US officials signaled that military operations against Iran are still escalating, and that diplomatic negotiations are almost impossible—contradicting Trump’s earlier hints that the conflict might end soon. This makes it increasingly difficult for the market to gauge how long supply disruptions may last.

Hormuz blockade devastates Middle East capacity

The Middle Eastern aluminum industry faces a double hit—direct reductions in smelter output due to conflict, and the blockade of the Strait of Hormuz further severing import channels for raw materials and export routes for finished products. The strait is a crucial shipping lane for Middle Eastern aluminum plants to acquire raw materials like alumina; the blockade has crippled this supply chain.

The Middle East accounts for about 9% of global aluminum production—a scale of supply disruption that cannot be overlooked. Amid growing market pressure, the number of canceled LME warehouse warrants has soared. According to Bloomberg data, this measure has seen the sharpest rise since May 2024, mainly driven by pickup demand at Malaysian warehouses.

Japanese aluminum premium surges to 11-year high

Aluminum premiums at Japan's main ports serve as important benchmarks for Asian aluminum pricing, paid in addition to LME spot prices. Bloomberg, citing informed sources, reports that Rio Tinto offered Japanese buyers a second-quarter supply premium of $350 per ton on Tuesday, which, if transacted, would mark the highest quarterly premium since 2015—when premiums exceeded $400 per ton.

It is notable that Rio Tinto previously quoted $250 per ton, but withdrew this offer and sharply raised it to $350 after US and Israeli actions against Iran escalated last week and aluminum prices surged. In addition to being a mining giant, Rio Tinto—with smelters in Canada and Australia—is one of the world’s top aluminum suppliers.

Tight supply has triggered a chain reaction among Asian downstream manufacturers. According to Bloomberg, several Japanese auto parts manufacturers have begun seeking supplies from Russian aluminum giant United Co. Rusal International PJSC to cope with shortages from the Middle East.

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