By Giulia Petroni
Aluminum is one of the industrial metals hit hardest by Middle East turmoil, as attacks on key hubs threaten global supply. Softer demand and rising stockpiles in China, however, are tempering some of the price gains.
Three-month aluminum futures on the London Metal Exchange hit their highest level since 2022 earlier this month, climbing above $3,400 a metric ton. In early U.S. trading on Thursday, prices retreated 6% to $3,214.50.
Higher costs are starting to pinch Chinese buyers. While sectors supported by government policies such as power grids and renewables remain steady, more price-sensitive industries are showing signs of fatigue.
"Higher prices are increasingly weighing on China's demand," said Ewa Manthey, commodities strategist at ING. Prices are now getting close to a point where manufacturers can't pass on costs without squeezing profits, she added, limiting near-term demand growth.
The amount of aluminum stored in warehouses linked to the Shanghai Futures Exchange and ready for delivery is at its highest level since 2020.
Since the conflict broke out in late February, key producers in the Middle East have been forced to scale back operations or suspend exports after Iran stepped up attacks on critical infrastructure and while shipments through the Strait of Hormuz remain effectively halted.
Aluminium Bahrain, which operates one of the world's largest smelters and produces more than 1.62 million metric tons of aluminum annually, began a phased shutdown of roughly 19% of its yearly capacity. Norway's Norsk Hydro said last week that its Qatari smelter, Qatalum--which has an annual capacity of 648,000 tons--could maintain output at around 60% of total capacity.
Fresh Iranian missile strikes on Thursday caused "extensive further damage" to the Ras Laffan complex, according to state-owned QatarEnergy, Hydro's joint-venture partner. The site houses the world's largest liquefied natural gas export facility. Qatalum's smelter isn't located within the complex, but it relies on natural gas supplied by QatarEnergy for its operations.
Still, "while buyers across Asia, Europe, and the U.S. are scrambling to secure aluminium, stockpiles in China continue to build, tempering some of the bullish price pressures," analysts at ANZ said. Higher aluminum prices outside of China are also incentivizing producers there to export more, which mitigates some of the global supply risks.
The Middle East accounts for about 8%-9% of global aluminum output, but produces only around 3% of global alumina and around 1% of bauxite, leaving smelters highly dependent on seaborne imports, according to market watchers.
With smelters in the Persian Gulf typically holding around three to four weeks of alumina inventories, prolonged shipping disruptions could force them to further reduce output, tightening global markets significantly.
Analysts also say that prices could shoot even higher. ING forecasts aluminum futures at $4,200 a ton in the second quarter--around $1,000 a ton higher than current levels--if disruptions last until the end of May.
Write to Billy Gray at william.gray@wsj.com
(END) Dow Jones Newswires
March 19, 2026 09:21 ET (13:21 GMT)
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