Mercuria to withdraw nearly 100,000 tonnes of aluminium from LME as Middle East supply disrupted, sources say

By Pratima Desai

LONDON, March 11 (Reuters) - Commodity trader Mercuria plans to withdraw large volumes of aluminium from LME warehouses, according to three sources, as the shutdown of the Strait of Hormuz freezes Middle East shipments and further strains supplies in Europe and the United States.

The Middle East produces about seven million metric tons of primary aluminium annually, or around 9% of the global total.

The closure of the Strait of Hormuz due to the U.S.-Israeli war against Iran has stalled aluminium shipments since last week.

Swiss-based Mercuria cancelled or earmarked for delivery nearly 100,000 tons of aluminium in LME-approved warehouses in Port Klang, Malaysia MALSTX-TOTAL on Monday, the sources, who were familiar with the matter, said.

Mercuria declined to comment.

Aluminium producers in the Middle East include Emirates Global Aluminium, Aluminium Bahrain ALBH.BH and Qatalum.

Last week, Alba, which operates one of the world's biggest smelters,declared force majeure, warning customers of delays to shipments while Qatalum started to shut down.

SLOW PROCESS TO RESTART PRODUCTION

Smelters have to reduce production slowly to avoid permanently damaging the aluminium pots that hold the molten metal. Once pots are cooled, restarting them is a slow process, keeping metal off the market for more months.

Mercuria is likely to need the aluminium in LME storage facilities to meet obligations to customers in Europe and the U.S., where there are shortages of aluminium used in transport, construction and packaging, the sources said.

The physical market premium aluminium consumers in the United States and Europe pay above the LME price, currently around $3,450 a ton, has soared since the war started.

In Europe, the duty-paid aluminium premium EPDc1 at around $420 a ton is at its highest since September 2022, when consumers stopped buying Russian aluminium after Russia invaded Ukraine.

In the United States, the Midwest premium AUPc1 at around $1.09 a lb or $2,400 a ton is near record highs.

Cancelled warrants, title documents conferring ownership, stood at 177,325, or 40% of the total on Tuesday, compared with 9% on February 27, before the turmoil in the Middle East started.

Last week Swiss commodity trader Gunvor cancelled more than 45,000 tons of aluminium in LME warehouses in Port Klang, the sources said.

Gunvor declined to comment.