Aluminum Prices Hit Four-Year High as Supply Chain Risks Become Reality

Smelters Hit by Middle East Airstrikes
Aluminum Three-Month Futures at $3,431
Up Over 9% From a Month Ago

Global aluminum prices have soared to their highest level in nearly four years. This surge is attributed to mounting concerns over the global supply chain after Middle Eastern aluminum smelting facilities suffered direct hits during an Iranian airstrike.

According to financial information platform Investing.com on March 30 (local time), the three-month aluminum futures price on the London Metal Exchange (LME) rose by 4.77% from the previous trading day to $3,431.50 per ton. This marks an increase of 6.32% from a week ago and 9.04% from a month ago, reaching the highest level since March 2022, immediately after Russia’s invasion of Ukraine.

Prices surged due to concerns over supply disruptions in the Middle East. On March 28 and 29, Iran launched drone and missile attacks on aluminum plants in the Persian Gulf region. Emirates Global Aluminium (EGA), the largest producer in the Middle East, reported having suffered “significant damage,” and Aluminium Bahrain (ALBA) is currently assessing the scale of the damage. The combined annual production capacity of these two facilities amounts to approximately 3.2 million tons.

The Middle East is responsible for about 9% of global aluminum production. The issue is compounded by decreased production capacity in other regions. Bloomberg reported that, with inventories depleted and less buffer capacity available, supply disruptions originating in the Middle East are now having a direct impact on the global market. In fact, inventories in LME-certified warehouses have fallen by more than 60% since May of last year.

Aluminum is produced as a primary metal in the form of ingots after bauxite mining and alumina refining. It is then used as a key raw material across all industries, including aerospace, automotive, and construction. As a result, disruptions at the smelting stage can quickly spread throughout the entire manufacturing sector.

Meanwhile, demand is expected to remain robust. As manufacturing activity in China, the world’s largest consumer, shows signs of recovery, there is a strong possibility that demand for industrial metals across the board will increase. The market expects that Chinese manufacturing has ended its two-month contraction and has entered an expansion phase this month.

Demand in Korea is also steadily increasing. According to the Public Procurement Service and the Korea Nonferrous Metals Association, domestic supply of aluminum ingots rose 16.6% from 1,389,820 tons in 2020 to 1.62 million tons in 2025. For this year, supply is projected to increase by about 3% compared to the previous year, reflecting a recovery in domestic demand and improvements in the construction sector. In particular, Korea is highly sensitive to supply shocks because it relies entirely on imports for its aluminum supply.

Market analysts expect that supply shortages could materialize from the second quarter. Goldman Sachs forecasts a supply shortage of about 900,000 tons in the second quarter of this year. It is further anticipated that this supply shock will intensify in the third quarter.

Traders and industry officials told Bloomberg that if transport through the Strait of Hormuz is not resumed quickly, production cuts will be inevitable, and warned that prices could surpass the previous record of $4,073.50 per ton set in 2022.

This content was produced with the assistance of AI translation services.