Aluminum drops to two-month low after US-Iran deal

Aluminum futures on the London Metal Exchange settled at their lowest since late March after the U.S. and Iran announced a framework to extend their ceasefire and reopen the strait.mining
The Strait of Hormuz closure had cut Middle Eastern smelter output sharply, with Emirates Global Aluminium declaring force majeure after missile strikes damaged its Al Taweelah plant.investing
Bank of America ↘0.58% analysts warned prices “look vulnerable near-term as supply risks ease and demand concerns persist.”mining

Aluminum Plunges 4.4% to Two-Month Low as US-Iran Deal Eases Supply Fears

Aluminum prices tumbled to their lowest level in more than two months on Sunday after the United States and Iran announced a preliminary agreement to end hostilities and reopen the Strait of Hormuz, deflating the supply-risk premiums that had propelled the metal to four-year highs earlier this year.

A Sharp Reversal

Three-month aluminum futures on the London Metal Exchange settled at $3,379.50 per metric ton on June 15, a drop of 4.4% and the lowest close since March 27, according to Bloomberg reporting republished by Mining.com. The decline came after President Donald Trump said in a social media post on Sunday that he was authorizing the “toll free opening” of the strait. Iran will allow free transit through the waterway for 60 days, Iran’s Fars news agency reported.nytimes

The deal, announced on June 14-15, is set to be formally signed on Friday in Switzerland. It extends the US-Iran ceasefire for an additional 60 days and opens the door to subsequent nuclear negotiations.npr

The Supply Story

The conflict had inflicted severe damage on aluminum supply chains. Middle Eastern smelters, which account for roughly 10% of global production, saw output fall 35% year-on-year in April after missile attacks on facilities and the closure of the strait choked off both raw materials and outbound shipments. Emirates Global Aluminium declared force majeure on some contracts after Iranian missile strikes caused damage at its Al Taweelah plant earlier in the conflict. LME aluminum had surged as high as $3,707.50 per metric ton in late May.investing

What Analysts Expect

Bank of America analysts including Michael Widmer warned that “aluminum prices look vulnerable near-term as supply risks ease and demand concerns persist,” though they noted that rising Chinese production could partly offset the Middle Eastern losses. Other downside risks include the potential release of stockpiled Middle Eastern aluminum once shipping resumes.mining

Gregory Shearer, head of base and precious metals research at JPMorgan Chase, cautioned that a strait reopening could trigger further selling. “If the strait does reopen, we could see a knee-jerk drop in prices because aluminum has been highly correlated with energy,” Shearer said. “But we still conclude that the market is facing a major supply gap.”mining

Shipowners said they need more details before assessing whether safe transits are possible, and some analysts expect the aluminum industry will continue to struggle in replenishing diminished reserves. All other LME metals settled higher on the day, with copper up 0.3% and tin jumping 2.9%.mining