Aluminium markets have been significantly impacted by ongoing supply disruptions in the Middle East, according to ING analysts Warren Patterson and Ewa Manthey. LME aluminium prices experienced a sharp decline of over 5.5% on Friday after Iran announced it would keep the Strait of Hormuz open during a 10-day ceasefire between Israel and Hezbollah, briefly fueling optimism for de-escalation in the region. The Strait of Hormuz, a critical route for global aluminium trade, had been closed since late February following US and Israeli strikes on Iran, which had previously driven aluminium prices to a four-year high last week due to supply disruptions [1].
However, the reopening was short-lived as the Strait was closed again over the weekend, underscoring the ongoing fragility of the ceasefire and keeping geopolitical risks at the forefront. The Middle East is responsible for approximately 9% of global aluminium production and is a key supplier to Europe, making the market highly sensitive to renewed disruptions [1].
The supply shock is no longer limited to logistics; ING notes that aluminium has now entered a structural deficit, with risks skewed to the upside if disruptions persist. Specific production issues include disruptions at Emirates Global Aluminium’s Al Taweelah smelter, reduced output at Alba, and earlier curtailments at Qatalum. These factors could collectively remove nearly 3 million tonnes per annum (mtpa) of capacity, representing almost half of Middle East production, and potentially widen the global supply deficit to 2 million tonnes [1].
Given the challenges associated with restarting smelting capacity, ING expects tight supply conditions to continue supporting aluminium prices, despite the potential for near-term volatility [1].
CONCLUSION
The aluminium market is facing a structural deficit driven by persistent Middle East supply disruptions, with the potential for further price increases if these issues continue. ING analysts highlight that the market remains highly exposed to geopolitical risks, and tight supply conditions are likely to underpin aluminium prices moving forward.