METALS-Aluminium price rises as Qatalum initiates production shutdown

(Updates prices throughout)

By Polina Devitt

LONDON, March 3 (Reuters) - The price of aluminium rose on Tuesday after Norsk Hydro's (NHYKF) joint venture in Qatar initiateda shutdown of its aluminium production, as the U.S. and Israeli war with Iran spilled into neighbouring countries.

Benchmark aluminium on the London Metal Exchange was up 2.1% at $3,259 a metric ton by 1754 GMT after hitting a one-month high of $3,315.

Norsk Hydro (NHYKF) said Qatalum's controlled shutdown was initiated due to the shortage of natural gas in Qatarand would be completed by the end of March. Qatalum has a production capacity of 636,000 tons of primary aluminium.Norsk Hydro issued a force majeure notice to its Qatalum customers. The Middle East accounts for 8% of global aluminium capacity, and exports its products via the Strait of Hormuz. On Monday, Iran vowed to attack any ship trying to pass through the strait. Aluminium producers paused second-quarter premium offers to Japanese buyers. Signalling worries about the availability of the metal for nearby supply, the spread between the LME cash aluminium contract and the benchmark swung to a premium of $4 a ton on Tuesday from last week's discount of $12 a ton.

Available aluminium stocks in the LME-registered warehouses fell to 375,525 tons, the lowest level since September, after 45,325 tons of fresh cancellations in Malaysia's Port Klang, daily LME data showed. Copper lost 1.5% to $12,909 a ton after hitting $12,722, its lowest price since February 19, as the U.S. dollar extended gains with the spike in energy prices and no end to hostilities in sight. A selloff in stocks and government bonds deepened, while precious metals were down sharply.

"It's a new world," said Ben Davis, head of European metals and mining research at RBC Capital Markets. "It was surprising how muted the reaction was yesterday, but markets are clearly catching up now." In other LME metals, tin slumped 9.0% to $48,755 a ton amid signs that Myanmar's Wa region is taking steps towards the gradual restart of mining operations. Nickel was down 0.3% at $17,100 a ton. Indonesia's nickel miners association said the government allotted a nickel ore output quota of 260 million tons for 2026. There will be an opportunity to propose a revision on the quota, it added. Zinc fell 1.3% to $3,270 a ton while lead lost 1.4% to $1,932.50 a ton. (Reporting by Polina Devitt; Editing by Louise Heavens and Paul Simao)