The London Metal Exchange’s benchmark has climbed to a fresh record as aluminium prices surge on fears of a severe and lasting shortfall in global supply following disruptions in the Middle East.
Industrial metals have posted notable gains on the London Metal Exchange (LME), lifting the index to an unprecedented level amid growing alarm over aluminium availability after recent interruptions in key production and distribution areas caused by the Iran war.
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The LME follows six primary base metals and has advanced almost 12% in the past four weeks closing at its highest point on record on Thursday.
Aluminium, which holds the largest weighting in the index and accounts for 75% of the benchmark together with copper, has risen roughly 15% since the start of the Iran war.
The conflict in the Middle East has led to direct Iranian attacks on aluminium facilities, including reported strikes on smelters in Abu Dhabi and Bahrain. The blockade of the Strait of Hormuz has also contributed to choking global supply.
These events have curtailed raw material movements and forced operational adjustments. Even with indications of potential de-escalation, the physical effects and logistical hurdles suggest that output losses may continue for some time.
Buyers in Europe and North America, already navigating sanctions on certain suppliers and trade limitations elsewhere, are now competing more intensely for available material, which has contributed to tighter inventories and elevated premiums.
The development highlights the speed with which geopolitical events can reshape commodity flows and pricing. With the Middle East contributing around 9% of global aluminium output, sustained pressure on regional production poses clear challenges.
JPMorgan Chase flags "black hole" supply deficit
JPMorgan Chase has warned that the aluminium market is heading into a metaphorical "black hole" owing to the extent of the supply losses.
In analysis released this week, the bank highlighted a dramatic escalation in disruptions that could create a severe and prolonged deficit, marking one of the most significant imbalances in recent memory relative to overall market size.
The assessment has reinforced expectations of further price strength in the coming months, with traders pricing in limited near-term relief.
Copper has delivered additional uplift to the LME through increased buying interest, particularly from Asian industries which are most affected by the Strait of Hormuz disruption.
While movements in the other metals within the index have been more restrained, the combined influence of aluminium and copper has been the primary driver of the record.
Traders and downstream users in sectors ranging from automotive manufacturing to construction will be watching developments in the Middle East with close attention.
A rapid easing of hostilities might temper some immediate price pressure, yet the underlying tightness in aluminium supply points to elevated costs persisting.
