Middle East supply disruptions push aluminium prices higher amid tightening global market

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Aluminium prices closed higher, rising 0.62 per cent to INR 381.2 (USD 3.94), as supply concerns linked to the Middle East conflict continued to support the market.

The ongoing tensions between the United States and Iran, along with restrictions on shipping movement through the Persian Gulf, have increased worries over global aluminium supply disruptions. Before the conflict, Gulf countries accounted for nearly 9 per cent of global aluminium supply and around 25 per cent of aluminium production outside China.

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Supply concerns intensified after attacks on refining facilities in the region. Operations at Aluminium Bahrain were suspended, while Emirates Global Aluminium is expected to require close to a year to fully restore production capacity at its main plant.

The aluminium market also remained in strong backwardation, indicating tight nearby supplies. Premiums for cash aluminium over the three-month contract climbed to near 19-year highs of around USD 84 per tonne.

Japanese buyers agreed to pay premiums between USD 350 and USD 353 per tonne for second-quarter aluminium shipments, marking the highest level in 11 years.

Also read: Gulf disruptions are reshaping global aluminium supply chains faster than expected

JPMorgan Chase & Co. expects the global primary aluminium market to face a deficit of 1.9 million tonnes in 2026 due to an estimated 2.4 million tonne supply disruption in the Middle East.

Bank of America also advanced its aluminium price target of USD 4,000 per tonne to the fourth quarter of 2026.

China’s aluminium imports increased 6.9 per cent year-on-year in March, while exports rose 15 per cent in April as overseas supply concerns boosted international demand.

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China’s aluminium production rose 3.1 per cent in April to 3.87 million tonnes, supported by healthy producer margins. However, inventories in Shanghai warehouses increased 3.3 per cent, which limited further gains in prices.

Market data showed short covering activity, with open interest declining 5.86 per cent to 2,780 lots while aluminium prices increased by INR 2.35 (USD 0.024) during the session.

Technically, aluminium prices are expected to find support near INR 377.7 (USD 3.90), with further support around INR 374.1 (USD 3.86). Resistance is seen near INR 383.7 (USD 3.96), while a breakout above that level could push prices toward INR 386.1 (USD 3.99).