Prices fell as much as 3.8% in London before giving up some gains. Qatar Energy halted production of aluminum and some chemicals as it dealt with the fallout from Iran’s attacks that shut down its largest liquefied natural gas plant.
QatarEnergy owns a 50% stake in Qatalum, which together with joint venture partner Norsk Hydro ASA is a major regional metals producer. Hydro later said that the specific implications for aluminum production at Qatalam are currently unclear and that Hydro is seeking more information. Copper fell more than 2% in London.
Iran has stepped up its response to US-Israeli strikes targeting US allies, and President Donald Trump has said there is no definite timetable for his military action. The State Department urged Americans to withdraw from Middle Eastern countries, citing “serious security risks” along with the dangers of war.
Qatar’s announcement adds to the growing pressure on markets in Asia, Europe and the United States for manufacturers and their customers in the region. Orders to pull aluminum from warehouses tracked by the London Metal Exchange more than doubled to 86,025 tonnes on Tuesday, as traders braced for widespread supply disruptions.
Emirates Global Aluminum – the UAE’s top producer – acknowledged the slowdown in its exports and said it may have to draw storage from outside the region to meet customer demand. Hydro had said on Monday that Qatalam was likely weighing up supply disruptions.
Rio Tinto Group on Monday withdrew an initial supply offer to Japanese customers for second-quarter supplies, as hostilities threatened to raise regional tariffs. The U.S. Midwest premium – a key benchmark for American producers – rose 1.4% on Monday to $1.055 a pound, just below the mid-February record of $1.065. Goldman Sachs Group Inc. said it sees a “significant rise” in premiums in Europe – a major market for Gulf producers – after levels hit their highest since 2022 last week.
InstitutionsBut there is also a risk that prolonged hostilities could hurt the broader economy and lead to a drop in demand for the metal.
“Prices reflect the competitive strength of short-term geopolitical risk premiums against concerns that persistent energy inflation could weaken global industrial demand,” CreditSite analysts wrote in an emailed note.
Trump said the U.S. planned military action for four to five weeks, but it could be longer, even as Defense Secretary Pete Hegseth dismissed the idea of an “endless war.” Any lingering conflict could leave an aluminum glut in countries like the United Arab Emirates and Saudi Arabia, which are starved of the raw material and unable to export the metal.
The Middle East accounts for about a fifth of production outside China. Most of the metals produced in the Gulf countries are largely exported through the Strait of Hormuz, which was closed as a trade route after the attacks. And while smelters will have reserves of raw materials such as bauxite and alumina, production cuts may be necessary if these begin to decline.
“Although Middle Eastern refiners may have about a month of feed stock inventory, they may be forced to cut production if the war drags on for about two weeks,” said Zhang Meng, an analyst at Shandong Easy Trade Information Consulting.
Zhang added that ship owners and insurers are already reluctant to deal with shipments to the Gulf, and many ports in the region have been closed.
A full month of lost production – combined with energy costs in Europe – could see aluminum prices rise to $3,600 a ton, according to Goldman Sachs. The bank’s base case is still for aluminum to average $3,150 in the first half of the year.
Aluminum buyers have already faced tight supplies this year after various production cuts and trade dislocations, and Chinese producers are approaching a government-imposed cap on the size of the industry. A planned mothballing of a large smelter in Mozambique in 2026 has increased supply concerns, and prices are now up 22% from a year ago.
Aluminum prices on the LME were up 2% at $3,259.00 a tonne by 12:18 a.m. local time, after earlier reaching $3,315 a tonne. Copper was 2.0% lower at $12,845.50 a tonne, as all metals except aluminum declined.
