Force majeure at two producers shifts risk into disruption
Citi raised its near-term price target for aluminium on the London Metal Exchange, citing supply disruption after war broke out in Iran and force majeure declarations among Gulf producers. The bank lifted its LME aluminium 0 to 3 month target to $3,600 a metric ton from $3,400 and said prices could reach $4,000 a ton in a bull-case scenario.
“Force majeure has now materialised at two Gulf producers, marking a clear shift from risk to realised disruption,” Citi said, framing the change as a move from potential constraints into measurable supply impacts.
LME three-month price hits near four-year high after Alba action
Benchmark three-month aluminium on the LME climbed to its highest level in nearly four years on Wednesday after Aluminium Bahrain, known as Alba, halted shipments. The move intensified market concerns that the Middle East conflict is now restricting availability of a metal that is widely used in construction, transport, and packaging.
Alba, which operates the world’s largest aluminium smelter outside of China, declared force majeure on Wednesday. The company warned some customers of shipment delays because it could not move cargo through the Strait of Hormuz.
Strait of Hormuz disruption and insurance issues extend the shock
Shipping through the Strait of Hormuz, the corridor between Iran and Oman, has slowed to a near halt after vessels in the area were hit by Iranian retaliatory strikes against the United States and Israel. The passage is best known for energy flows, carrying about one-fifth of global oil consumption, but the disruption is now affecting other commodities that depend on the same route and on the availability of marine insurance.
Citi said the impact could be prolonged because of difficulties around shipping and insurance. It said container-shipped primary aluminium and value-added products may take longer to normalize than tanker-based flows, even if partial transit resumes.
Restart risks add a second constraint beyond logistics
Beyond transport, Citi highlighted operational risks that could delay supply recovery. The bank noted potential facility or potline instability, an issue that can complicate restarts and potentially keep production offline for months once disruption has occurred.
The bank’s view aligns with other bullish scenarios emerging in the market. Goldman Sachs said on Monday that aluminium prices could reach $3,600 a ton if regional production is lost for a month, underscoring how quickly tight logistics and reduced output can reshape price expectations.
