Aluminium Slides to 2-1/2-Month Lows as Middle East Supply Fears Ease, China Demand Weakens

Aluminium dropped to 2-1/2-month lows on Tuesday as traders and funds reversed bets on higher prices as concerns about supplies from the Middle East receded. U.S. President Donald Trump on Monday said a Memorandum of Understanding had been signed to end the U.S.-Israeli war with Iran, though full details have not been released. Benchmark aluminium on the London Metal Exchange was little changed at $3,378 a metric ton at 0954 GMT after hitting an earlier $3,334, its lowest since March 27. The closure of the Strait of Hormuz has disrupted supplies from the Middle East, which accounts for 9% of global aluminium smelting capacity. It has also limited shipments of the raw materials needed to produce aluminium. Damage to aluminium smelting facilities in the region mean production is unlikely to ramp up quickly, industry sources say. However, expectations that aluminium will soon start flowing from the Middle East have pushed the premium for the cash LME contract over the three-month forward to flip to a discount . The discount, at around $21 a ton, is at levels last seen before the U.S.-Iran war started on February 28. Aluminium was also under pressure from signs of weak demand in China, the top consumer and producer, where inventories have climbed . Stocks of the metal in warehouses registered with the Shanghai Futures Exchange at 528,885 tons are up nearly 270% since the start of the year and at their highest since March 2020. Weak economic data from China is also weighing. "Consumer spending and investment both disappointed, reinforcing concerns about domestic demand at a moment when the global aluminium market is already wrestling with uncertainty," Britannia Global Markets said in a note. "With aluminium highly correlated to energy prices, any further clarity on the reopening of Hormuz will remain the dominant driver." In other metals, copper was down 0.1% to $13,735 a ton, zinc retreated 1% to $3,554, lead slipped 0.1% to $1,968, tin was little changed at $55,310 and nickel fell 0.5% to $17,815.