Aluminum industry "throat" gripped by pliers: the threat of US attacks on 9% of global aluminum production capacity, the conflict in the Strait of Hormuz raises premium expectations.

Notice that aluminum prices have risen due to market concerns that the supply route in the important global production area of the Middle East will be disrupted due to conflicts. At the London Metal Exchange (LME), aluminum prices rose by 2.8% in early trading, reaching $3,228 per ton, before narrowing the gains. The Strait of Hormuz, as a trade bottleneck located near the Iranian coast, is a necessary route for many major aluminum producers in the region to export metal and import raw materials. Following the US and Israel's attacks on Iran, the Middle East conflict escalated over the weekend, with retaliatory strikes launched by Tehran against multiple countries. According to consultancy firm AZ China Ltd., the region accounts for around 9% of global aluminum production capacity, and aluminum prices are typically very sensitive to the rapid escalation of regional tensions. Gulf countries are important participants in the global aluminum industry. Li Xuezhi, director of the Chaos Ternary Futures Research Institute, stated that if there is a potential interruption in the supply flow of bauxite or alumina required by aluminum smelters in the Middle East, it would pose a "significant risk." He believes that aluminum prices are likely to continue to rise. US President Trump stated that the US military will continue to bombard Iran until its goals are achieved, and he called on the Iranian military and police to surrender, otherwise they will face a "definite death." Iran responded to the US attacks by launching multiple rounds of missiles at neighboring countries including Saudi Arabia, the United Arab Emirates, and Bahrain, all key global aluminum-producing countries. As of the time of writing, LME aluminum prices have risen by 1.2%, to $3,178 per ton. London copper prices fell by 0.7% after an earlier rise, while zinc prices remained stable. Iran has become an important zinc supplier to China, which helped keep zinc prices in the domestic Chinese market relatively lower compared to other regions of the world last year. The response in the base metals market varies, and aluminum price increases are relatively moderate, which may reflect investors' broader concerns about the impact of an escalation of a war in Iran on energy prices and the global economy. The US dollar strengthened on Monday, providing resistance to bulk commodities priced in US dollars. Analysts from Citigroup, including Wenyu Yao, stated in a report that the aluminum market is currently facing "macroscopic seesawing": on one hand, tensions in the Gulf threaten to push up regional premiums in Europe and the US; on the other hand, safe haven positions and a strengthening US dollar are causing "offsetting drag." Citigroup pointed out that aluminum smelters typically maintain around one to two weeks' worth of alumina inventory, limiting immediate production risks. The bank stated that higher premiums, soaring freight costs, and increased delays in shipping in the Gulf region are the most likely short-term impacts. Meanwhile, iron ore prices in Singapore fell by 0.2%, to $98.15 per ton. According to data from BMO Global Commodities Research, the Middle East is a major production area for global iron ore pellets, accounting for 13% of the global market share. In addition, China's steel exports to the region had been on the rise previously.