Aluminium prices slide as Middle East supply fears ease

By Pratima Desai

Aluminium prices slipped on Monday on an easing of fears that weekend tit-for-tat strikes between the U.S. and Iran would escalate into a wider conflict and disrupt Middle East shipments, traders said.

Benchmark aluminium LME:AH1! on the London Metal Exchange traded 0.2% down at $3,164 a metric ton in official rings.

Talks between Washington and Tehran over the Strait of Hormuz, a key shipping channel, will resume on Tuesday in Qatar.

"The situation is still fluid and any renewed disruption could quickly tighten availability for ... aluminium," Britannia Global Markets said in a note.

"The aluminium market suffered significant disruption by the suspension of trade through the strait."

The Middle East accounts for 9% of global aluminium smelting capacity. Disrupted supplies pushed prices to $3,787.50 this month, the highest since March 2022. Since then, prices of the metal used in transport, construction and packaging have dropped by 16%.

As supply worries have receded, the premium for the cash aluminium contract on the LME has flipped from a 19-year high over the three-month forward to a discount.

On the technical front, support for aluminium stands at the 200-day moving average, currently around $3,160. Resistance on the upside is at the 100-day moving average around $3,410.

Elsewhere, metals markets are focused on the strength of the U.S. currency, which makes dollar-priced metals more expensive for buyers with other currencies.

The dollar is heading for its largest monthly gain in a year, boosted by growing chances of higher interest rates in the United States to contain inflationary pressures.

"A hawkish U.S. rates backdrop initially drove the selloff across energy and precious metal markets before the industrial metals suite came under pressure last week," said Alastair Munro, senior base metals strategist at broker Marex.

Three-month copper LME:CA1! eased by 0.2% to $13,325 a ton, zinc COMEX:ZNC1! rose 0.1% to $3,477, lead MCX:LEAD1! gained 0.2% to $1,908 and tin MYX:FTIN1! jumped 1.4% to $51,250 while nickel MCX:NICKEL1! lost 0.4% to $16,630.

Clues to demand for industrial metals will come this week from top consumer China's manufacturing PMIs.