Supply risks and Asian tightness support prices – Commerzbank

Commerzbank analysts highlight that Aluminium has gained around 10% since early March as the Iran conflict amplifies supply concerns, especially given the Gulf’s producer role and China’s production cap. Chinese output data and International Aluminium Institute figures will be watched for signs of expansion. Tightness is particularly acute in Asia, with sharply higher Japanese premiums and strong LME warehouse withdrawals.

China caps output as regional premiums jump

“The base metals markets are also keeping an eye on Chinese production figures, with a particular focus on Chinese aluminum production. Due to the high importance of the Gulf region as a producer and the sharp rise in prices, aluminium is the only metal price that has risen significantly since the beginning of the month, up by a good 10%.”

“China is by far the largest producer, however, the annual production cap set by the government has now been reached. It remains to be seen whether the high prices – at USD 3,500 per ton, aluminum costs only 10% less than at its record high in spring 2022 – will provide an incentive to expand production.”

“The production figures from the International Aluminium Institute, which are also due to be published, will also show what production trends are emerging elsewhere. There, too, the rise in prices is likely to have provided an incentive to expand production. This is particularly true in the US, where the high price level is accompanied by a record-high physical premium.”

“Supply concerns in the wake of the Iran conflict continue to be felt on the aluminum market as well. The amount requested for withdrawal of the metal from LME warehouses rose this week to its highest level since spring 2024.”

“The requests were primarily directed at warehouses in Malaysia, which suggests that the supply situation is particularly tight in Asia. This is also indicated by reports that a leading mining company has significantly increased premiums for aluminum buyers in Japan to their highest level in more than 10 years.”

“However, since China is by far the world’s largest aluminum producer, producers there could increase their exports in the short term — not least because of the more attractive prices — and potentially provide relief.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)