Commodity Radar: Aluminium supply squeeze offers opportunity as Religare suggests targets

Aluminium prices are witnessing a sharp rally driven by global supply disruptions amid escalating geopolitical tensions in the Middle East. The ongoing Iran-Israel/US war has triggered the prices on the back of a supply-squeeze scenario, with markets reacting strongly to concerns over production outages and tight inventories. While near-term volatility remains elevated—especially with the risk of sudden de-escalation triggering profit booking—the broader outlook stays constructive as long as structural supply constraints persist.

Aluminium’s April contracts rose 1.2% or Rs 4.4 per kg to hit the day’s high of Rs 357.20 on the MCX.

Ajit Mishra, Senior Vice President, Research at Religare Broking, said that the current rally is driven by recent global supply shocks, driven specifically by the disruptions in the Middle East and Iran’s missile strike on the smelters.


“The supply-squeeze rally has pushed prices above the 360 mark in the previous week. The current volatility is triggered by the geopolitical events; therefore, any sudden de-escalation news in the Middle East could cause a sharp long liquidation, resulting in a rapid price drop since the traders will prefer booking profits. Nonetheless, as long as the structural supply deficit continues, the holistic view shall remain positive,” Mishra added.

Iran has struck targets in all GCC countries, driving major producers to stop aluminium refining activity and risking the suspension of operations in the region that produces 10% of global supply.

Mishra further said that Qatar had halted its aluminium operation, while major facilities in the UAE and Bahrain remain vulnerable to further attacks and power interruptions from strikes on energy infrastructure.

Additionally, the LME and MCX warehouse stocks are near multi-year lows, the Religare analyst added, highlighting that when inventories are this thin, even small buying orders or minor news of fresh escalation of the Iran-US conflict can cause outsized price spikes.

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Technical outlook

The chart exhibits a powerful “bullish breakout” following a long period of consolidation. The price is riding the upper band, signifying extreme bullish momentum. The upward trend is intact also because MCX Aluminium prices are ruling significantly above the key exponential moving averages.

Mishra said weekly charts convey the possibility of reasonable gain from current levels, as long as the daily closing remains above the support of Rs 335.

Maintain buy on dips around an immediate support region of Rs 348-350, and aim for targets of Rs 370-372 with closing stop loss of Rs 335, this analyst said. This implies a 4% gain in the near term.

(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)