Aluminium hits four-year high on renewed Middle East supply risks

LONDON, June 1 (Reuters): Aluminium prices soared to their highest point in more than four years on Monday as Middle East supply risks escalated after the US and Iran traded military strikes, traders said.

Benchmark aluminium on the London Metal Exchange traded 0.5 per cent higher at $3,685 a metric ton in official rings. Earlier, it touched $3,707.50 to match a level hit on May 26 for its highest point since March 2022.

The Middle East houses 9 per cent of global smelting capacity for aluminium. The closure of the Strait of Hormuz has restricted aluminium exports from the region and limited imports of the raw materials needed to smelt the metal used to manufacture cars, aeroplanes, beer cans and building materials.

Analysts expect a large aluminium market deficit this year, with some floating numbers above 2 million tons.

"Aluminium remains the standout story," Britannia Global Markets said in a note. "The extreme backwardation highlights the severity of the squeeze."

Backwardation refers to the premium for nearby LME aluminium contracts against those along the maturity curve .

The premium for the cash aluminium contract over a three-month forward surged to 19-year highs above $100 a ton on Friday.