Supply alert temporarily lifted! Signs of easing tension in the Middle East, aluminum prices continue to fall.

After US President Trump hinted that the Middle East war may be coming to an end, aluminum prices continued to fall from their four-year highs. On March 9th local time, Trump said that the US war with Iran may be ending soon. Trump stated in a phone interview, "I think the war is pretty much over. They don't have a navy, they don't have a communication system, and they don't have an air force." Trump also said that progress was much faster than his initial estimate of 4 to 5 weeks. On Tuesday, London Metal Exchange (LME) aluminum futures fell 2% to $2,215 per ton. Aluminum prices had already started falling on Monday amidst a general sell-off in financial markets. Aluminum prices had previously reached a high of $3,544 per ton, the highest level since March 2022, due to escalating conflicts in the Middle East, the fact that the Strait of Hormuz was effectively closed, cutting off aluminum transportation in the Persian Gulf region, where about 9% of global aluminum supply is sourced. In the meantime, spot aluminum prices against the three-month futures price also fell on Monday from a high of $59 per ton during intraday trading to $22.47, indicating some easing of market concerns about supply shortages. It is reported that the tense military situation in the Middle East is threatening the global aluminum supply chain. The six countries in the Middle East (Iran, Saudi Arabia, the United Arab Emirates, Bahrain, Qatar, Oman) have a total of about 7 million tons of aluminum smelting capacity, with Iran alone having a capacity of nearly 800,000 tons, facing dual threats to raw material inputs and finished product outputs. Against the backdrop of overall weak global aluminum inventory resistance to shocks, aluminum prices are trending upwards. Previous analysis has indicated that if the conflict in the Middle East continues to escalate and leads to prolonged increases in energy prices, it could result in rising electricity costs for aluminum smelting companies in the Middle East and even globally, squeezing their profits. Considering that some countries in Europe and America are facing issues with electricity supply for restarting production and new capacity growth, global energy costs may increase, leading to shutdowns or reductions in high-cost areas and further impacting global primary aluminum supply, driving aluminum prices up. Jon Li, an analyst at Guangzhou Finance Holdings Futures Co., stated that Trump's remarks have eased market concerns about aluminum supply from the Middle East. However, he added that the potential for a further significant drop in aluminum prices may be limited, as Chinese demand rises in the spring and aluminum prices in the Shanghai market may find support around 24,000 yuan per ton (about $3,475).