BEIJING: Aluminium prices in London hit their highest level in nearly four years, as the escalating conflict in the Middle East heightened concerns about tighter global supplies, offsetting pressure from a stronger dollar.
Benchmark three-month aluminium on the London Metal Exchange hit its highest since March 31, 2022, at $3,544 per metric ton earlier in the session. It was up 1.77% at $3,507 per ton by 0305 GMT.
The most-traded aluminium contract on the Shanghai Futures Exchange rose 3.29% to 25,310 yuan ($3,658.15) per ton, after touching its highest since January 30 at 25,860 yuan earlier in the session.
The U.S.-Israel war with Iran has disrupted shipping through the Strait of Hormuz, a crucial waterway for the Gulf, which accounts for about 9% of global aluminium production.
The light-weight metal, used in construction and packaging, posted its biggest weekly gain since January 2023 last week, as supply concerns exacerbated after Qatari smelter Qatalum began shutting down production and Aluminium Bahrain declared force majeure on shipment.
"Extended disruption in the Strait would simultaneously choke alumina inflows and aluminium exports for Middle Eastern smelters. That would tighten global supply meaningfully," Ewa Manthey, commodities strategist at ING, wrote in a note.
The Middle East escalation could push aluminium above $4,000 per ton, said Manthey.
Other base metals were broadly tamed by a firmer dollar as oil prices surged by around 20%.
A stronger dollar weighs on commodities denominated by the greenback by making them less affordable for investors using other currencies.
Among other LME metals, copper lost 0.58%, nickel slipped 0.97%, lead fell 0.87% and tin tumbled 4.72% while zinc added 0.49%.
Elsewhere, Shanghai copper slid 0.92%, tin slumped 3.78%, while nickel and lead erased earlier losses to gain 0.43% and 0.24%, respectively, following better inflation data in China. Zinc strengthened 0.52%.
China's consumer inflation accelerated to the highest in more than three years due to the effects of the Lunar New Year holiday. ($1 = 6.9188 Chinese yuan) - Reuters
