StoneX’s Natalie Scott Gray argues base metals have shifted from a broad macro-driven rally into a more fragmented market where metal-specific supply shocks dominate. She ranks aluminium, nickel, and copper as the most exposed to the Iran war and related energy/sulfur disruptions, while warning that demand destruction may become more visible in the second half of the year.
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This interview argues that the base metals complex has moved from a late-2025 environment of broad optimism to a more uneven and volatile setup in 2026. Natalie Scott Gray, identified as StoneX senior metals analyst, says the prior rally in the base metal index was supported by a “perfect storm” of weak USD expectations, anticipated US rate cuts, hopes for China stimulus, geopolitical easing around Russia/Ukraine, supply risks in copper/tin/nickel, speculative inflows, and US tariff/stockpiling effects on critical minerals. She says the current environment is different: the US dollar is firmer, the house view is now zero US rate cuts, Europe may even face hike talk, China’s March “two sessions” disappointed because stimulus was absent, and investors are split geographically between COMEX/LME net longs and Shanghai net shorts. …
Near term, the trade is vulnerable to headline-driven spikes in aluminium and nickel while the market watches for fresh Middle East escalation or sulfur supply disruptions. Tactical risk is that prices can overshoot on supply scares even as demand has not yet rolled over.
Over the next few weeks to months, the base case is more two-way price action as supply shocks get priced in and then challenged by softer manufacturing, China weakness, and margin pressure. The view is invalidated if energy prices quickly normalize or if policy/supply responses restore volumes faster than expected.
Structurally, the transcript argues that industrial metals are entering a more fragile regime where energy intensity, geopolitics, and export controls repeatedly reset the cost curve. In that environment, supply reliability—not just global growth—becomes the dominant driver of valuation.
The base metals rally at the end of last year was supported by a 'perfect storm' of weak USD expectations, rate-cut hopes, China stimulus optimism, supply risks, speculative inflows, and tariff stockpiling.
She explicitly lists all those drivers as the explanation for record highs in the base metal index.
Current macro conditions are less supportive because the dollar is stronger, the Fed is expected to cut zero times, Europe may hike, and China disappointed on stimulus.
She contrasts the current macro backdrop with last year's and says these factors cloud the outlook.
Aluminium is the most exposed base metal to the Iran war and energy squeeze.
She ranks aluminium first because of Middle East production concentration, shipping exposure, smelter damage, and high energy intensity.
How has the landscape changed for base metals since the end of last year?
Natalie says the base metal index is now at record highs but some price drivers have weakened. At the end of last year, the rally was justified by a perfect storm: weak US dollar, expected rate cuts, optimism about China stimulus, supply risks, speculative investor appetite, and US tariff stockpiling. Now, the dollar is stronger, rate cuts are off the table, China's stimulus disappointed, investors are divided globally, and the macro outlook is more clouded. The index remains at highs driven by a refocus on supply fundamentals.
How is the Iran war impacting base metals and which metals face the largest impact?
Natalie ranks aluminium first, nickel second, and copper third. Aluminium is most impacted because the Middle East produces 9% of global output and 80% is shipped through the Strait of Hormuz; smelters have been bombed, risking up to 51% of Middle Eastern supply being taken out swiftly. The market moved from a 200,000 ton deficit to a 2 million ton deficit for aluminium.
Why would aluminium be the most impacted by the Iran war?
The Middle East produces 9% of global aluminium output (23% outside China), and about 80% of its refined aluminium is shipped through the Strait of Hormuz. Plants in Iran, Qatar, and Bahrain have reduced run rates, and specific strikes hit Aluminium Bahrain and Emirates Global Aluminium smelters, risking up to 51% of Middle Eastern supply. Aluminium is also highly energy-intensive, and pre-war supply was already tight with South32's Mozal smelter offline due to gas contract issues and Europe unable to take Russian stocks.
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