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Aluminium prices rise as focus shifts to the Middle East

After a short sell-off caused by the 'U.S.,' aluminium prices recovered on Wednesday as attention shifted to the loss of supply in the Middle East due to conflict. Donald Trump's comments on the Iran War.

As of 0213 GMT, the most-traded aluminum contract on Shanghai Futures Exchange increased 2.31%, to 25,275 Yuan ($3,680.81) a metric ton. The contract fell 1.41% Tuesday, as Trump's remarks suggesting an end to the Iran war in the near future temporarily cooled supply concerns.

The benchmark three-month aluminum?on London Metal Exchange rose 0.5% to $3,423 a ton. On Monday, it reached a high of $3,544.

The Middle East war, which accounts for?around 9% of the global supply of aluminium, has caused shockwaves on the global market, by?effectively stopping shipments through the Strait of Hormuz.

In response, the Qatari smelter Qatalum halted production, and Aluminium Bahrain declared force majeure for shipments.

Jing Xiao is a senior analyst at SDIC Futures and said that the structure of backwardation reflects the tightness in supply near-term.

Backwardation is the market structure in which immediate deliveries command a higher price than later deliveries.

SDIC's Xiao said that once the production had been shut down it would take a minimum of a half-year to restart operations. This indicates a long absence of supply from?the Middle East.

Investors are also awaiting the release of a number of economic indicators, including the consumer price index this week, to determine the direction the Federal Reserve will take.

Copper, among other SHFE metals rose 0.36%. Nickel fell by 0.95%. Lead dipped by 0.27%. Tin lost 0.7%. Zinc was flat.

Other LME metals saw a slight decline in copper, while nickel, lead, and tin all fell. Zinc was also little changed. Reporting by Amy Lv, Lewis Jackson and Ronojoy Mazumdar; editing by Ronojoy Mazumdar.

(source: Reuters)