Copper falls, aluminium spreads spike as US plans Hormuz blockade

Copper fell and a key aluminium spread flared as US President Donald Trump’s vow to blockade the Strait of Hormuz threatened more uncertainty for metals markets already reeling from the six-week conflict in the Middle East.

The failure of US-Iran negotiations in Pakistan at the weekend — and Trump’s subsequent pledge to enforce a naval blockade of the maritime chokepoint — unraveled a brief bout of market optimism. Metals are broadly at risk from weaker demand as soaring energy prices hurt the global economy, although aluminium has gained due to a supply crunch arising from the war.

The immediate reaction on the London Metal Exchange echoed that dynamic, with copper falling as much as 1.3% in early trading on Monday, while aluminium gained as much as 0.9%.

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The clearest sign of escalating stress in the aluminium market was in a ballooning backwardation on the LME. The spread on cash contracts over those for delivery in three months jumped 37% from Friday to reach $91.50 a ton — the highest since 2007 — pointing to a growing call on immediate deliveries as buyers hunt for alternative sources of the metal.

Emirates Global Aluminium PJSC, the Middle East’s top producer of the metal, has invoked force majeure clauses on at least some deliveries after one of its smelters was put out of action by an Iranian attack. The Middle East accounts for about 9% of global output.

The US military said it would implement the blockade of all maritime traffic entering and exiting Iranian ports at 10 a.m. Monday Eastern Time, adding that it would allow other vessels to transit Hormuz if they’re not stopping in the Islamic Republic.

Copper fell 0.5% to $12 782 a ton at 11:00 a.m. Shanghai time, while aluminum was up 0.2% at $3 504 a ton.

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