Citi has increased its price target for London Metal Exchange (LME) 0-3 month aluminum futures from $3,400 to $3,600 per ton, suggesting that in a bullish scenario, prices could climb to $4,000 per ton. The bank cited supply disruptions following the outbreak of conflict in Iran as the primary reason for the upward revision.
Citi noted that two aluminum producers in the Gulf region have declared force majeure, indicating that supply disruptions have shifted from a risk to a reality.
On Wednesday, LME benchmark three-month aluminum prices hit their highest level in nearly four years after Aluminum Bahrain (Alba) halted shipments, intensifying concerns over the impact of Middle East tensions on the supply of the metal, which is widely used in construction, transportation, and packaging.
Alba, which operates the largest aluminum smelter outside China, declared force majeure on Wednesday and warned some customers of shipment delays due to an inability to transit through the Strait of Hormuz.
The Strait of Hormuz, which lies between Iran and Oman, handles about one-fifth of global oil consumption. Since Iran launched retaliatory strikes against the U.S. and Israel, vessel attacks in the region have brought shipping through the strait to a near standstill.
Citi indicated that the conflict's effects may persist longer due to shipping and insurance complications. Even if partial transport resumes, the normalization of container shipments for primary metal and value-added products is likely to be much slower than for oil tankers.
The bank also highlighted the risk of instability at facilities or electrolysis lines, which could delay restart timelines by several months.
Meanwhile, Goldman Sachs stated on Monday that aluminum prices could reach $3,600 per ton if supply disruptions in the region last for one month.
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