Hormuz reopening hopes fade as aluminium, copper gain support

Hopes for a reopening of the Strait of Hormuz briefly cooled the recent rally in aluminium prices amid the ongoing Gulf conflict, but production data and Chinese market dynamics are now providing fresh support to both aluminium and copper markets.

Aluminium briefly slipped after optimism around potential reopening of the key shipping route, only to rebound as supply concerns persist.

Aluminium rebounds on Gulf cuts

The aluminium price, which peaked last Thursday at a new four-year high of nearly $3,700 per ton, even slipped temporarily below $3,450 per ton.

However, it has since rebounded.

The three-month aluminium contract on the London Metal Exchange was last at $3,532 per ton, down 0.6% from the previous close.

Production figures from the International Aluminium Institute are providing support, as March production in the Gulf region was a solid 6% below the previous month on a daily basis and nearly 5.5% below the previous year’s level.

"Production figures from the International Aluminium Institute are providing support, as March production in the Gulf region was a solid 6% below the previous month on a daily basis and nearly 5.5% below the previous year’s level," said Barbara Lambrecht, commodity analyst at Commerzbank.

Thanks to a slight increase in production in China, daily global production was nevertheless only 0.3% below February’s level and even 1% above the previous year’s level.

Chinese imports of alumina the key feedstock in aluminium production rose by 87% in March compared to the previous month and, at nearly 340,000 tons, were almost 30 times higher than the previous year. 

China is currently receiving some shipments that were originally destined for the Gulf region, with falling feedstock prices supporting attractive margins for Chinese smelters.

Copper hits record output despite negative premiums

Chinese refined copper production continues to rise, reaching a new all-time high in March despite challenging smelting economics.

Refined copper production in China rose to 1.33 million tons in March, reaching a new all-time high by a very narrow margin.

The previous all-time high was set just last December and was only 40,000 tons below March’s level. Compared to the previous year, production thus rose by 6.6%.

"All of this continues to take place against a backdrop of negative smelting and refining premiums (TC/RCs), which reached a new low of negative USD 66.1 per ton in March," said Volkmar Baur, FX and commodity analyst at Commerzbank.

"Refined copper production thus continues to be driven by rising prices for sulfuric acid, a byproduct of refined copper. In China, these prices rose again by over 30% in March compared to the previous month, making them more than double the level seen in March of last year."

At the time of writing, the three-month copper contract on LME was at $13,296.53 per ton, up 0.5%.

Export curbs on sulfuric acid

The Chinese government has now announced restrictions on sulfuric acid exports, which is expected to dampen byproduct prices and affect incentives for smelters.

"The export restriction on sulfuric acid thus hits the copper market twice. On the one hand, the incentive for copper smelters in China to continue producing copper is diminishing in light of negative TC/RCs. On the other hand, the global market is now facing a shortage of sulfuric acid," said Volkmar Baur.

Last year, Chinese net exports of sulfuric acid amounted to around 4.5 million tons.

The shortage could tighten supply of copper concentrate further, especially as the Gulf region is also a major producer of sulfur.

Analysts note that ongoing uncertainty over the Strait of Hormuz continues to underpin bullish sentiment in both metals, with physical supply disruptions and Chinese market responses shaping near-term price direction.