Aluminium hits one-week low as alternative Gulf shipping routes provide some relief

Aluminium prices retreated on Wednesday after Emirates Global Aluminium secured alternative export routes bypassing the Strait of Hormuz, taking some of the edge off supply fears that have gripped the market since the U.S.-Israeli conflict with Iran escalated. The relief, however, looks partial at best. The LME three-month contract fell 0.6% to $3,379.50 a ton in official open-outcry trading, having touched $3,336 intraday — its weakest since March 10. Yet analysts cautioned against reading the dip as a turning point. The growing supply squeeze from Middle East production disruptions and an anticipated drawdown in inventories should keep prices supported, according to TD Securities head of commodity strategy Bart Melek. The stakes are considerable. More than 5 million tons of aluminium transit the Strait of Hormuz annually from smelters in Bahrain, Qatar, Saudi Arabia and the UAE, with vast quantities of bauxite and alumina travelling in the opposite direction to feed those same facilities. Any sustained disruption to that corridor would reverberate across global supply chains. The tension between easing spot fears and structural tightness was visible in the physical market. The duty-paid European aluminium premium — the surcharge consumers pay above the LME benchmark — climbed to $450 a ton this week, its highest since August 2022, reflecting how tight nearby supply has become on the continent regardless of headline price moves. Copper Weighed by Inventory Glut Copper told a different story. The red metal slid 1.3% to $12,607 a ton in official trading, its lowest since January 9, as warehouse stocks swelled to 334,100 tons — the highest level since August 2019. Fresh inflows of 3,775 tons into U.S.-registered LME warehouses added to the overhang. The abundance of nearby metal drove the cash-to-three-month discount to $113.50 a ton, its widest in 13 months, signalling little urgency among buyers to secure prompt supply. Adding to the bearish tone, China's copper exports nearly doubled in the first two months of the year compared with the same period in 2024, further pressuring the market. Broad Sell-Off Across the Complex The weakness spread through the metals complex. Zinc dropped 1.9% to $3,165, touching a two-month low of $3,130. Lead eased 0.6% to $1,918, tin lost 0.8% to $46,350, and nickel edged down 0.2% to $17,160. The divergence between aluminium and copper encapsulates the split personality of base metals right now: geopolitical risk propping up one market while a wall of inventory suppresses another.