Aluminum prices rose to a one-month high on Monday after attacks on Iran by the United States and Israel raised concerns about a protracted conflict in the Middle East, a major aluminum producer.
Benchmark aluminum prices on the London Metal Exchange rose 3.1% to $3,236 a tonne at 1050 GMT, after hitting their highest since Jan. 29. Investors are closely monitoring trends surrounding shipping in the Strait of Hormuz. The Strait of Hormuz is a key goods trade route disrupted by Iranian attacks on US military bases in the region.
Neil Welsh of Britannia Global Markets said: “Base metals are sharply higher this morning as aluminum rises on concerns that important supply routes for Middle East producers will be disrupted by conflict in the region, which accounts for a significant portion of global output.”
“The region accounts for about 9% of the world’s aluminum production capacity, and prices are typically sensitive to spikes in regional tensions.”
According to the International Aluminum Association, global primary aluminum production reached about 75 million tons last year. Most of the aluminum produced in the Middle East is exported to the United States and Europe.
“The UAE is by far the largest producer in the region, and virtually all regional cargo has to pass through the Strait of Hormuz, with the exception of Oman’s Sohar Aluminum, which exports via the Gulf of Oman,” Citi analysts said in a note.
However, a prolonged war in the Middle East could cause oil prices to rise significantly and hinder economic growth.
“We should expect weak global investment sentiment to dampen demand growth for industrial metals, including copper,” said Tom Price, an analyst at Panmure Liberum.
Copper rose 0.2% to $13,370 a tonne, zinc rose 1% to $3,351, lead rose 0.6% to $1,974, tin fell 1.1% to $57,105 and nickel fell 1.1% to $17,645.
(Reporting by Pratima Desai; Editing by David Goodman)
