In the wake of the escalation of the Iran war and the associated blockage of the Strait of Hormuz, oil prices have shot up. But aluminum is also seeing strong growth.
• Iran war causes price jump for raw materials
• Aluminum production in the Middle East is falling
• China remains sitting on stocks
The outbreak of the Iran War and the associated blockage of the Strait of Hormuz has had a drastic impact on oil prices. Among other things, attacks on oil and gas facilities have led to a massive jump in prices.
What may be less well known: The Iran war has also impacted aluminum prices, causing shutdowns and disrupted shipping in a region that accounts for about 9 percent of global supply, according to Bloomberg. The price recently jumped to a 4-year high. Although the metal is quite common in the world, it plays an important role in the global economy. It is used in numerous industries such as electronics, transport, construction, solar panels and packaging.
With the outbreak of war in the Middle East at the end of February, three-month aluminum futures on the London Metal Exchange (LME) jumped 10 percent. By mid-March the value had leveled off at an increase of around eight percent.
Aluminum production is falling
At the same time, attacks on industrial facilities are leading to a decline in production of the industrial metal. As CNBC writes, the operator of the world’s largest smelting plant, Alba from Bahrain, has already reduced its annual production by 19 percent, increasing concerns about a global shortage.
As the raw materials analysis company CRU Group estimates, the price of aluminum, which is currently trading at around $3,253, could rise to $4,000. As CNBC CRU chief analyst Guillaume Osouf reflects in an article, the price would probably be higher today if demand for the industrial metal were not currently so weak. However, this could change quickly if the conflict lasts for a long time.
“A protracted conflict is likely to dramatically alter our market outlook for the remainder of the year, having a lasting impact on global supply and potentially negative consequences for demand,” Osouf said.
China remains sitting on stocks
The largest aluminum producer in the world is China, but the People’s Republic usually limits production to 45.5 million tons per year in order to avoid overcapacity and reduce emissions. “If the Chinese government decides that prices are too high, it can restart a number of abandoned smelters in the country and the world will be flooded with aluminum,” said Artem Volynets, CEO of mining company ACG Metals, on CNBC’s “Europe Early Edition” on Wednesday.
Inventories are already piling up in China. For primary aluminum, they have risen to their highest level since 2020, according to Bloomberg. More exports would be needed to reduce the overhang. However, given the high prices, it doesn’t look like there is much willingness to buy: “Chinese steel processors have scaled back purchases to just meet immediate needs,” Huang Yuyao, an analyst at research firm Mysteel Global, told the news agency.
China’s overseas sales of raw aluminum and aluminum products have already increased by 13 percent in the first two months of 2026, the news agency writes. In the past, the People’s Republic has boosted its exports when domestic demand was too weak, but this has always been a thorn in the side of the global economy. However, given the supply shortages in the Middle East, this is likely to be more welcome in the coming months.
Aluminum investment not for small investors?
Despite the recent price jump, analysts do not see aluminum as a suitable asset for small investors – in contrast to, for example, copper or silver. Volynets would be “surprised” if private investors would become active in the industrial metal. However, Osouf highlighted that short sellers had increased their exposure by 15,000 contracts, indicating that more investors expected prices to fall again.
Martina Köhler, editorial team at finanzen.net
