FX.co ★ Aluminum Holds Losses

Aluminum futures in the UK hovered around $3,250 per tonne, extending their pullback from a four-week high as a stronger US dollar pressured dollar-denominated commodities. The greenback firmed after persistently high US inflation led traders to increase bets on a Federal Reserve rate hike later this week.

Even so, aluminum prices remain supported by tight supply. The ongoing US-Iran conflict has disrupted shipments from the Middle East, where GCC production fell 44% year-on-year in July. Before the conflict, the region accounted for roughly 10% of global output. LME inventories are still near a 36-year low, while SHFE stockpiles continue to decline, underscoring limited availability in the physical market.

Looking ahead, the supply picture may gradually improve. Several smelters are restarting and ramping up previously curtailed capacity, alongside new expansion projects. In addition, rising aluminum exports from top producer China could help ease supply constraints and cap further price gains.