The current situation and the outlook for the near future looks challenging to say the least.
- Market Snapshot
- Price Surge: Aluminium contracts on the Shanghai Futures Exchange (SHFE) jumped 3.41% to 25,340 Yuan/MT.
- Multi-Year Highs: On the London Metal Exchange (LME), the benchmark three-month contract reached $3,484.5/tonne, hitting its highest level since March 2022.
- Record Gains: Last week marked the biggest weekly gain for aluminium since early 2023.
- Key Drivers Behind the Rise
The current price volatility is driven by a “perfect storm” of geopolitical and operational factors:
- Strait of Hormuz Disruptions: Ongoing conflict has heightened risks in this vital waterway, which handles roughly 9% of global aluminium production. This creates a massive bottleneck for both alumina imports and metal exports.
- Supply Chain Force Majeure: Regional supply has tightened significantly as key players in (Qatar) began shutting down production, and others have (Bahrain) declared force majeure on shipments.
- Energy Costs: A 20% surge in oil prices has increased the overall cost of production and international logistics for base metals.
- Looking Ahead
Market analysts, are warning that; if the escalation in the Middle East continues:
- Supply Tightness: The global supply chain could face a severe deficit as Middle Eastern smelters are “choked off” from global trade routes.
- Price Targets: Forecasts suggest that aluminium prices could potentially break the $4,000/tonne threshold in the short-to-medium term.
Our Recommendation
Given the high volatility, we advise our partners to:
- Review current inventory levels to ensure coverage for the second quarter.
- Consider early booking for upcoming shipments to mitigate the risk of further price hikes and logistics delays.
Kerimed and our supply partners remain committed to keeping you informed and helping you navigate these market challenges. This could be an opportune time to consider new supply partners and KERIMED may have that solution for you