Citi has adjusted its short-term price outlook for LME three-month aluminium, increasing the 0-3 month target to $3,600 per metric ton from a prior $3,400/ton forecast. The bank also said that, in a bull-case scenario driven by deeper supply disruptions, prices could climb to $4,000/ton.
The revision follows force majeure declarations by aluminium producers in the Gulf region after a war broke out in Iran, a development Citi flagged as a turning point from potential to actual supply interruption. "Force majeure has now materialised at two Gulf producers, marking a clear shift from risk to realised disruption," Citi said.
Benchmark three-month aluminium on the London Metal Exchange reached its highest level in nearly four years on Wednesday after Aluminium Bahrain (Alba) halted shipments, intensifying concerns about the impact of the Middle East conflict on global metal supplies. Alba, which runs the largest aluminium smelter outside China, declared force majeure and informed some customers that delays were possible because it could not route shipments through the Strait of Hormuz.
Shipping through the Strait of Hormuz - the narrow passage between Iran and Oman that handles around one-fifth of global oil consumption - has been reduced to a near halt after vessels in the area were struck by Iranian retaliatory strikes against the U.S. and Israel. The resulting disruption to maritime traffic has constrained the movement of metal and raised insurance and logistics frictions.
Citi warned that the effects could endure beyond immediate shipment stoppages due to complications with shipping and insurance. It said container-shipped primary metal and value-added aluminium products are likely to normalise more slowly than flows moved by tanker even if some partial transit through the Strait resumes.
The bank also pointed to potential operational vulnerabilities at production sites, noting risks of facility or potline instability that could delay restarts by several months.
Separately, Goldman Sachs commented that aluminium prices could reach $3,600/ton if regional production were lost for the duration of a month.
Clear summary
Citi lifted its LME aluminium 0-3 month target to $3,600/mt from $3,400/mt and said prices could hit $4,000/mt in a bull-case, citing force majeure declarations at Gulf producers and severe shipping disruptions through the Strait of Hormuz. Alba's halt of shipments pushed three-month LME aluminium to a near four-year high, and banks warn of prolonged normalisation as insurance and logistical issues persist alongside potential plant instability.