Middle East conflict triggers supply crisis, Japan's aluminum premium surges to an 11-year high.

Due to the conflict in the Middle East leading to a tightening of aluminum supply, the aluminum premium charged to Japanese buyers has risen to the highest level in 11 years. According to sources familiar with the matter, Rio Tinto plc Sponsored ADR group (RIO.US) proposed a premium of $350 per ton in the second quarter to supply this lightweight metal. Sources said that this would be the highest quarterly premium since 2015 (when it exceeded $400). Given Japan's industrial volume, the "main Japanese ports" aluminum premium is a closely watched Asian pricing reference. This premium is paid on top of the London Metal Exchange spot price (a global benchmark). The war with Iran has forced a reduction in production in the Middle East, which accounts for about 9% of global production. The Strait of Hormuz has effectively been closed, stopping the flow of raw materials into the region and finished products out. Rio Tinto plc Sponsored ADR is better known as a mining giant, but it is also a top aluminum supplier due to having smelters in Canada and Australia. The company had previously proposed a $250 premium, but withdrew that offer last week following increased strikes against Iran by the US and a surge in prices. Aluminum, widely used in various industries from airplanes to cans, has risen over 9% on the LME this month, bringing the past year's increase to 27%. The escalation of the Middle East conflict has led several Japanese automotive parts manufacturers to seek supply from Russian aluminum giant RUSAL.