Aluminium supply risks have moved back into focus over the past week following reports that Iran targeted two of the Middle East’s key aluminium smelters over the weekend. Emirates Global Aluminium’s Al Taweelah complex in Abu Dhabi and Aluminium Bahrain’s Alba smelter, with combined annual production of approximately 3.1 million tonnes (around 4% of global supply) are reported to have sustained significant damage.
The nature of aluminium production means that forced shutdowns pose a particularly acute risk. If power supply is disrupted and operations cannot be maintained, molten metal can solidify within the smelting infrastructure, potentially causing long-term damage. Restart timelines in such scenarios can be extended, in some cases exceeding six months, thereby prolonging supply disruption.
This latest development comes against an already constrained supply backdrop. The aluminium market currently has a limited buffer, with LME inventories remaining relatively low at around 500,000 tonnes. This compares to a global annual supply of around 75m MT. As a result, any unexpected supply shock has the potential to shift the market balance rapidly into deficit, placing upward pressure on prices. While higher prices may incentivise increased production outside the Gulf region, the ability for ex-Middle East supply to respond quickly remains uncertain, particularly given ongoing energy constraints and capacity limitations in key producing regions.
Earlier in the month, several smelters in the Middle East were forced to curtail production due to natural gas supply constraints. Disruptions are not limited to the region: India’s Hindalco has also reportedly paused sales of certain aluminium products, reflecting broader energy-related production challenges across the sector.
In response to these tightening supply conditions, aluminium prices have moved higher, rising by approximately 10% over March. Three-month LME aluminium traded over 3,500 \$/MT yesterday. This contradicts the broader downtrend seen in other metals.
Copper has traded around 12,200 \$/t over the past week, moving below the 13,000 \$/t levels seen earlier in 2026. Prices have softened amid ongoing concerns around the inflationary impact of the Middle East conflict and the potential drag on global growth and industrial demand. Despite the recent pullback, global copper inventories remain elevated, currently around 200% above the five-year average. This provides a meaningful buffer to the market in the near term and has been a key factor adding downward pressure to prices.
However, there are early signs of demand re-engagement at lower price levels. Chinese buyers, who had largely remained on the sidelines while prices were elevated, have begun to return to the market. This is reflected in rising import premiums, which have reached a nine-month high, alongside early indications of declining regional stockpiles.
Prices have firmed modestly in overnight with the 3-month LME Copper trading over 12,400 \$/b, supported by more constructive geopolitical commentary suggesting a potential de-escalation in the Middle East. Trump last night said the war in the Middle East could soon be over and the US will leave within the next two to three weeks. In addition, latest production data from Chile showed a 4.8% year-on-year decline, highlighting that underlying supply-side challenges persist despite the current macro-driven softness in prices.
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