Aluminum futures fell to $3,450 per tonne, hitting an over two-month low, as the United States and Iran agreed on a framework to end their war that includes reopening the Strait of Hormuz and raising expectations for a resumption of Persian Gulf aluminum exports.

Key Highlights

  • UK aluminum futures fell to $3,450 per tonne, an over two-month low.
  • The US and Iran agreed on a framework to remove the US blockade and reopen the Strait of Hormuz.
  • The official signing ceremony is scheduled for June 19 in Switzerland.
  • The Persian Gulf accounts for roughly 9% of global primary aluminum output.

Aluminum futures traded in the UK declined to $3,450 per tonne, marking their lowest level in more than two months, after the United States and Iran reached a framework agreement to end their war. The agreement includes the removal of the US naval blockade on Iranian ports and the reopening of the Strait of Hormuz, with the official signing ceremony scheduled for June 19 in Switzerland.

The decline in aluminum prices reflects expectations that the agreement could pave the way for a resumption of aluminum exports from the Persian Gulf, a region that plays a significant role in global primary aluminum production. The Gulf accounts for roughly 9% of the world's primary aluminum output, making any disruption or recovery in the region's smelting operations a meaningful factor for global supply.

Despite the positive market reaction, supply-side concerns in the region have not fully dissipated. Key Gulf aluminum producers faced significant operational challenges during the early stages of the conflict, when facilities came under attack.

One major regional smelter operated by EGA is expected to take up to a year to return to full production capacity, while Bahrain's ALBA smelter continues to operate below normal levels. For primary producers such as Alcoa Corporation (NYSE:AA) and Century Aluminum Company (NASDAQ:CENX), the prospect of restored Gulf supply introduces a new variable into global pricing dynamics that have already been shaped by tighter bauxite availability and the slow pace of recovery at facilities like EGA's flagship smelter.

Beyond the direct impact of the conflict on Gulf production, the aluminum market has also been affected by tighter restrictions on bauxite exports from Guinea, a key source of the raw material used in alumina and aluminum production. These restrictions have added to broader concerns about raw material availability for the global aluminum supply chain, even as the prospect of restored Gulf exports has weighed on prices in the near term.

The combination of an improving geopolitical outlook following the US-Iran agreement and lingering operational constraints at major Gulf smelters creates a mixed picture for aluminum markets. While the immediate price reaction has been to the downside on expectations of restored regional supply, the slow pace of recovery at facilities such as EGA's flagship smelter and ALBA suggests that any actual increase in exported volumes may take considerably longer to materialize than the price move might suggest.

Market participants will likely continue to watch developments around the implementation of the agreement, including the pace at which Gulf producers can restore output, alongside ongoing raw material supply constraints from Guinea, as key factors shaping the aluminum market in the months ahead.