Middle East Tensions, Shipping Disruptions Fuel Aluminium Price Rally

Chennai: Middle East tensions and disruptions along shipping routes have added fresh momentum to the rally in aluminium prices, which were already climbing on the back of strong demand and tightening supply. Emerging technologies such as aluminium-ion batteries—reportedly being explored by companies like Tesla—could open new avenues for long-term demand.

Aluminium prices have already been on a strong upward trend even before the latest geopolitical developments. Over the past year, global aluminium prices have risen nearly 25%, while domestic prices on the Multi Commodity Exchange (MCX) have gained over 30%. Since January alone, prices have climbed around 12%, reflecting a broad-based rally across base metals such as copper, zinc and aluminium, said Ajay Kedia, MD, Kedia Commodities.

According to him, the rally is part of a broader commodity cycle. Typically, energy prices rise first, followed by bullion as investors seek safe havens during uncertainty. Once macroeconomic conditions stabilize, industrial commodities begin to rally as consumption picks up.

Even before the Middle East crisis, aluminium fundamentals were strengthening. Production constraints at smelters, particularly in China, combined with steady demand growth had tightened the market. As copper prices surged in the past six to eight months, several industries increasingly shifted towards aluminium as a lower-cost alternative.

The geopolitical situation has now intensified supply concerns. Shipping disruptions that began around late February have threatened roughly 5.14 million tonnes of aluminium supply. The Middle East is a critical hub for global aluminium exports, accounting for nearly 9–9.5% of global production and exporting about 5.5 million tonnes annually. Disruptions along routes such as the Strait of Hormuz have therefore had a significant impact on market sentiment.

At the same time, global inventories have tightened sharply. Aluminium stocks in London Metal Exchange (LME) warehouses have dropped to around 446,875 tonnes—the lowest level since July 2025. Additional supply pressure has emerged from production cuts at Mozambique’s Mozal smelter.

Demand remains robust across multiple sectors. Aluminium is widely used in packaging, automobiles and electronics, while its role in electrical infrastructure is also expanding. The electric vehicle industry has become an important growth driver due to aluminium’s lightweight properties and high conductivity.

Over the longer term, emerging technologies could also support demand. Companies such as Tesla are exploring aluminium-ion battery technology as a lower-cost alternative to lithium batteries. If commercialized, such innovations could significantly expand aluminium’s role in the electric vehicle ecosystem and strengthen the metal’s long-term demand outlook.

Looking ahead, Kedia expects aluminium prices on the LME to hold around $3,400 in the near term, with the potential to rise to $4,200–$4,300 if supply disruptions persist. Domestic MCX prices could move towards ₹440–₹450 over the next year.