METALS-Aluminium rallies, focus on supply disruptions from Middle East conflict

By Pratima Desai

LONDON, March 11 (Reuters) - Aluminium prices rallied on Wednesday as market focus shifted to global supply losses from the Middle East conflict, following a brief selloff sparked by comments from U.S. President Donald Trump on the Iran war.

Benchmark aluminium CMAL3 on the London Metal Exchange was up 1.1% higher at $3,444 a metric ton at 1704 GMT. Earlier this week, it touched $3,544 a ton, its highest since April 2022.

Trump on Monday predicted the conflict would end well before the initial four-week timeframe he had laid out. The war has effectively frozen shipments due to the closure of the Strait of Hormuz and threatened global supplies of aluminium used in transport, construction and packaging.

The Middle East is home to around seven million metric tons of aluminium smelting capacity, or roughly 9% of the global total.

Last week, Aluminium Bahrain ALBH.BH or Alba, which runs one of the world's biggest smelters, declared force majeure warning customers of delays to shipments, while Qatari smelter Qatalum started to shut down.

Reinforcing concerns about supplies are aluminium stocks in LME-approved warehouses.

Cancelled warrants or metal earmarked for delivery 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.

Worries about tight aluminium supplies have created a premium or backwardation for the cash contract over the three-month forward on the LME CMAL3.

Industrial metals overall are under pressure from concerns about global economic growth as a result of soaring oil prices and a firmer dollar.

A rising U.S. currency makes dollar-priced metals more expensive for holders of other currencies, which could subdue demand.

Copper CMCU3 lost 0.7% to $13,046 a ton, zinc CMZN3 slipped 0.9% to $3,314, lead CMPB3 retreated 0.3% to $1,937, tin CMSN3 was down 1% to $49,950 and nickel CMNI3 gained 1.4% to $17,725.

"Over the past two weeks nickel ore prices have risen strongly in Indonesia... This underpins a floor price in LME prices of $17,000-18,000 a ton based on conversion costs of nickel pig-iron furnaces to make LME grade metal," said Macquarie analyst Jim Lennon in a note.

"We think as the nickel market continues to tighten amid rising costs, NPI and LME nickel prices have further upside."