Citi lifts aluminium 0–3 month target to $3,600 per metric ton

March 4 (Reuters) – Citi has raised its LME aluminium 0–3 month price target to $3,600 a metric ton, up from $3,400/t, and said prices could climb to $4,000/t in a bull-case scenario, citing supply disruptions and force majeure declarations after war broke out in Iran.

“Force majeure has now materialised at two Gulf producers, marking a clear shift from risk to realised disruption,” Citi said.

Benchmark three-month aluminium on the London Metal Exchange hit its highest in nearly four years on Wednesday after Aluminium Bahrain (Alba) stopped shipments, deepening worries about the impact of the Middle East conflict on supplies of the metal, which is used widely in construction, transport and packaging.[MET/L]

Alba, which operates the world’s biggest aluminium smelter outside of China, declared force majeure on Wednesday, warning some customers of delays because it could not ship through the Strait of Hormuz.

Shipping through the Strait between Iran and Oman, which carries around one-fifth of oil consumed globally, has ground to a near halt after vessels in the area were hit by Iranian retaliatory strikes against the U.S. and Israel.

Citi said the effects of the conflict could be prolonged because of issues surrounding shipping and insurance, with container-shipped primary metal and value-added products likely to normalise more slowly than tanker-based flows, even if partial transit resumes.

It also noted risks of facility or potline instability, which could delay restarts by several months.

Meanwhile, Goldman Sachs said on Monday that prices could hit $3,600 a ton if production in the region was lost for a month.

(Reporting by Anushree Mukherjee in Bengaluru; Editing by Chris Reese and Edmund Klamann)