The Middle East conflict reshapes the global aluminum supply and demand landscape. Japanese aluminum prices surge, reaching the highest premium in 11 years.

The Zhitong Finance APP learned that after the Iran war disrupted the global energy and commodities supply system in the Middle East, Japanese aluminum buyers agreed to pay the highest premium/overcharge per ton in 11 years. This cost is likely to exacerbate the inflationary pressures faced by various manufacturing plants that use this core industrial metal.

As shipping in the Strait of Hormuz remains under the substantial control of Iranian forces, and the conflict in the Middle East continues to escalate, the region in the Persian Gulf, which accounts for about 10% of global aluminum supply, is seeing significant production cuts. This includes Aluminium Bahrain announcing force majeure leading to large-scale production cuts and Qatalum’s partial shutdown. The strong rise in aluminum prices this year, driven by structurally tight supply, still has significant upward potential.

Media reports, citing informed sources, indicate that some Japanese buyers have agreed to pay a premium/overcharge of $350 per ton for shipments from global mining giant Rio Tinto Group for the second quarter—a staggering increase of 80% from the previous quarter’s $195—and are paying even higher premiums of $353 per ton for South32 Ltd. cargoes. Since the negotiations or transactions are private, these sources requested anonymity. Statistics show this is the highest quarterly premium level since 2015, when it exceeded $400 per ton.

According to media reports, a spokesperson for South32 stated that this is a “mutually agreed upon recognized price,” but did not provide further details. Rio Tinto did not immediately respond to requests for comment. Sources indicate that some spot cargoes have even traded at higher premiums of $360 to $370 per ton.

Given Japan’s significant role in the global industrial sector, the aluminum premiums at Japan’s major ports are a closely watched reference indicator for industrial metal and commodity pricing in the Asian market. This fee is an additional payment on top of the spot prices for metals on the London Metal Exchange (LME), which serves as the global benchmark for metal prices.

Aluminum, a lightweight industrial metal, has long been viewed as a substitute for copper, especially in applications sensitive to cost and weight with relatively relaxed conductivity requirements. This substitution trend has been ongoing for over a decade and has accelerated in recent years due to resource security and the push for new energy industries, yet copper remains irreplaceable in high-reliability, high-power applications.

Aluminum is widely used in automotive bodies, certain consumer electronics, window frames, and beverage cans, with its price rising over 10% on the London Metal Exchange this year. If the Middle East war continues to deteriorate, it is likely to keep aluminum supply extremely tight, suppressing production and shipments from this region (the Persian Gulf), which accounts for about 9% to 10% of global production.

Beware of the “smokescreen” of peace negotiations initiated by the U.S.! The geopolitical situation in the Middle East may further deteriorate.

On the 26th, Trump posted on social media that the airstrikes on Iranian energy facilities would be delayed by another ten days, until 8 PM EST on April 6, causing global stock markets and commodity markets to rise upon hearing the news. However, the Pentagon’s significant troop increase in the Middle East and the potential for ground forces to strike Iran’s Khark Island, along with the market’s psychological preparedness for escalating geopolitical conflicts in the Middle East over the weekend, have led some investors to remain highly cautious.

Trump publicly urged Iran to “seriously consider” the ceasefire proposal and claimed that Iran was eager to reach an agreement. However, Iran has made it clear that it has no formal negotiation plans for now unless its core demands regarding the Strait of Hormuz and future security guarantees are substantively met. Meanwhile, missile exchanges between Israel and Iran continue and intensify, indicating that the so-called “talks” or “U.S.-Israeli-Iran talks expectations” are far from translating into an actual ceasefire.

More critically, the market should not overlook that it is not the negotiation posture that matters most, but rather that the radius of conflict spillover is expanding. Latest media reports indicate that the Houthi forces in Yemen have stated that they will join the fight in support of Iran if necessary, which could directly extend the risk from the Strait of Hormuz to the Bab el-Mandeb Strait and the Red Sea shipping routes. If the Strait of Hormuz is already disrupting global energy flows, igniting the Bab el-Mandeb Strait would impact not just oil but also broadly affect shipping, insurance, inventory cycles, and global supply chains. In other words, the most dangerous aspect of the current geopolitical situation in the Middle East is not whether fighting will continue, but whether it will slide from a single battlefield to a “dual energy choke point and severe impacts on two shipping lanes.”

Therefore, investors need to be very wary of the “smokescreen” of negotiations thrown out by the U.S. The current diplomatic signals are insufficient to prove a de-escalation; instead, they appear more like a combination of wartime pressure and a bid for ground forces or a buffer time for the next round of large-scale airstrikes/missile attacks.

For market asset pricing trends, this means that “having contact” should not be mistakenly extrapolated to “rapid ceasefire”; for macro judgments, this means that oil prices, commodities, liquefied natural gas, shipping, and inflation expectations should still retain significant premium space. If the market continues to trade based on the “TACO-style” peace script, there remains a risk of further bombings in the Middle East in the short term.

From the Strait of Hormuz to Japanese ports: The geopolitical conflict in the Middle East is reshaping the global aluminum price curve.

For LME aluminum prices, market trading is no longer merely a bullish sentiment; it is a real tightening of spot supply and a re-pricing of regional premiums—such as Japanese aluminum premiums for the second quarter reaching $350-$353 per ton, setting an 11-year high. Wall Street analysts still have an overall bullish outlook on aluminum prices into 2026, with the reasons not solely focused on geopolitical conflict but also including long-term aluminum demand and lightweight substitution driven by energy transition and the wave of AI data center construction, as well as long-term constraints on the supply side. In particular, the strong new demand from data centers has become a new growth engine for the copper market, while aluminum is more of a “secondary beneficiary” of the substitution effect on the grid equipment side amid rising copper prices.

The latest round of geopolitical conflict in the Middle East has merely pushed the already tight aluminum supply-demand balance further towards a gap. In other words, aluminum is not primarily stimulated by single production cuts or export restrictions like nickel; it inherently has a strong industrial demand base, and the Iran war has accelerated the logic of long-term tight supply and demand, leading to quicker and more intense pricing.

In the near future, aluminum prices are likely to trend towards increases with difficulty in declines, and regional premiums and spot prices are likely to continue outperforming the LME flat benchmark prices. However, if macro stagflation or recession expectations significantly heat up in the short term, LME international aluminum prices may exhibit more volatility and a more pronounced downward trend.

As LME aluminum prices reached their highest level since 2022 in March, and the forward curve has switched to a spot premium mode, implied volatility in options and European spot premiums have surged in tandem, indicating that the market no longer views this round of shocks as transient noise but is pricing in an expansion of the supply gap and intensified spot tightness. Consequently, JPMorgan defines the current situation as a “supply-driven event horizon.” JPMorgan’s analyst team believes that if the production cuts in the Middle East spread, there is potential for LME international aluminum prices to swiftly reach $4,000 per ton. Currently, LME aluminum prices hover around $3,260 per ton.

JPMorgan emphasizes that the buffer in the global aluminum market is already very thin. As LME inventories approach low levels, a significant portion of deliverable inventory is not the preferred source for Western buyers. Europe and the U.S. have a high dependency on imported primary aluminum from the Middle East, compounded by contractions in other European smelting capacities and elevated costs due to U.S. tariffs. This intensifies the competition for aluminum metal supply. JPMorgan believes that the global aluminum market is approaching a re-pricing inflection point dominated by supply shocks, insufficient inventory buffers, and accelerated spot re-evaluation, with multiple driving forces behind aluminum prices potentially quickly reaching $4,000.