LME traders were pricing the wrong metal supply crisis

FE Team | Published: April 03, 2026 22:45:25

LONDON, April 3 (Reuters): Metals traders started the year worrying about a looming supply crunch in copper but ended the first quarter facing a very imminent supply crisis in aluminium.
The Iran war, now in its fifth week, has dampened some of the speculative frenzy that spilled out of the gold and silver markets into the London Metal Exchange (LME) base metals complex in January.
But it has propelled aluminium to its highest level since 2022 with two Gulf smelters damaged by Iranian missile strikes and shipping through the Strait of Hormuz still severely constrained.
The fact that tin matched aluminium's first-quarter performance tells you that the metals bulls are still lurking in the wings even as surging energy prices darken the demand outlook.
The Iran war has exposed the fragility of the Western aluminium supply chain. The Gulf accounts for around 9% of world smelting capacity and 18% of global exports outside of China.
The initial impact was a logistics squeeze caused by the effective closure of the Strait of Hormuz. Both Qatari smelter Qatalum and Aluminium Bahrain (Alba) reduced operating rates to preserve raw material stocks.
Then came the direct strikes. Alba was targeted by Iranian missiles and is now down to 30% capacity, while the giant Al Taweelah smelter, operated by Emirates Global Aluminium, is completely out of action after damage to its power plant, according to consultancy Wood Mackenzie.
It's a crisis that no one saw coming, and the shock waves are running down the supply chain.
Western aluminium buyers are facing a double blow from the simultaneous rise in the LME aluminium price and a sharp jump in physical premiums.
LME copper hit an all-time nominal high of $14,527.50 per metric ton in January as investors bought into the metal's enticing bull narrative of stellar demand growth and constrained supply.
There is, however, no shortage of copper in the here and now. Global exchange stocks closed March at just over 1.4 million metric tons, a multi-year high.
The growing mountain of surplus metal has dampened some of the bullish fire and LME three-month copper closed the quarter at $12,335.50 per ton, 15% below the January peak and pretty much flat on the start of the year.
The same pattern has played out in tin , which leapt to a record high of $59,040 per ton in January as investors chased the same meme of supply scarcity.