Rio Tinto PLC has suspended negotiations with Japanese customers regarding aluminum supplies for the second quarter, citing escalating hostilities in a key production region following attacks by the US and Israel on Iran. According to informed sources, the company, one of the world's largest aluminum suppliers with smelters in Canada and Australia, has withdrawn a previously proposed premium of $250 per ton. The sources indicated that Rio Tunto attributed the change in its offer to the impact of Middle East conflicts on metal prices. Japan is a major aluminum importer, and the Japan premium is viewed as a benchmark reflecting demand in East Asia, a primary downstream market. The initial premium level of $250 per ton proposed by Rio Tinto was at least the highest since 2015, according to two people familiar with the matter.
Over the weekend, attacks by the US and Israel on Iran heightened tensions in the Middle East, prompting retaliatory strikes by Iran on several neighboring countries. The region accounts for approximately 9% of global aluminum production capacity, as per data from consultancy AZ China Ltd., and aluminum prices have historically been sensitive to increased geopolitical instability there. Li Xuezhi, Director of Chaos Ternary Futures Research Institute, stated that potential disruptions to the supply flow of bauxite or alumina required by Middle Eastern smelters pose a "very significant risk." He believes aluminum prices are likely to continue rising.
Some aluminum products from the Middle East are shipped to the United States, where prices have exceeded the global benchmark in recent months due to tariff measures implemented by President Trump. This lightweight metal, used in a wide range of products from aircraft to beverage cans, saw its price rise by as much as 3.6% on the London Metal Exchange on Monday, reaching $3,254 per ton. According to Fastmarkets, the premium for metal delivered to the US Midwest region climbed to a record high last month. Since President Trump raised metal tariffs to 50% in June, this premium has more than doubled.
Analysts including Wenyu Yao from Citigroup noted in a report that the aluminum market currently faces a "macro-level tug-of-war": on one hand, the Gulf situation threatens to push regional premiums higher in Europe and the US; on the other hand, risk-off positioning and a stronger US dollar "create an offsetting drag."