Aluminium prices increased by 0.41% to close at Rs 375.7, bolstered by rising supply concerns associated with ongoing disruptions in the Strait of Hormuz. The extended geopolitical conflict has markedly affected production in the Middle East, with reports indicating damage to essential refineries in the UAE and Bahrain, thereby heightening concerns over a prolonged supply disruption. Market participants are increasingly considering a potential structural deficit, with Mercuria characterizing the situation as a “black swan” event for global aluminium supply. Tightening inventories and reduced output are fundamentally providing strong support to prices.
LME aluminium stocks decreased to 393,800 metric tons, and inventories at significant Japanese ports experienced a month-on-month decline of 7.4%. Moreover, Japanese purchasers consented to pay premiums at levels not seen in 11 years for second-quarter shipments, indicative of constrained physical supply. Production disruptions in the Gulf region, responsible for approximately 9% of global supply, resulted in a 6% decline in output in March, underscoring the immediate consequences of the conflict.
JP Morgan anticipates a considerable global shortfall of 1.9 million tons by 2026, with average prices projected to hover around $3,500 per ton, potentially escalating towards $4,000 in the short term. On the demand side, China continues to be a significant contributor, as evidenced by a 6.9% year-on-year increase in imports in March, alongside a 2.7% rise in primary production. Nevertheless, the increasing inventories in Shanghai suggest a certain degree of localized supply accumulation.
From a technical perspective, the market is experiencing renewed buying interest, as evidenced by a significant increase in open interest of 27.44% to 3,000, suggesting the establishment of new long positions. Aluminium exhibits immediate support at Rs 372.8, with potential further decline towards Rs 369.9. On the upside, resistance is observed at Rs 379.1, and a breakout above this level may propel prices toward Rs 382.5.