TD Securities’ Global Strategy Team reports that aluminium markets are experiencing significant supply disruptions due to conflict in the Persian Gulf, with Bahrain shipments halted, Qatar's Qatalum smelter set to shut down, and the Alba facility in Bahrain declaring force majeure while seeking alternative shipping solutions [1]. These production stoppages and slowdowns are projected to reduce supply by approximately 1.3 million tonnes in 2024, setting the stage for a substantial 1.9 million tonne market deficit by 2026 [1].
Over 5 million tonnes of primary aluminium are shipped annually through the Strait of Hormuz by smelters in Bahrain, Qatar, Saudi Arabia, and the United Arab Emirates. The region also imports large quantities of bauxite and alumina to feed these smelters, raising concerns that prolonged closure of the seaway could lead to further production shutdowns [1].
This supply disruption has propelled London Metal Exchange (LME) aluminium prices to as high as $3,534 per tonne, a level not seen since 2022 when Russia was sanctioned following its invasion of Ukraine. US and European aluminium premiums have also reached multi-year highs, with the US Midwest premium currently hovering around $2,400 per tonne, supported by a 50% import tariff [1].
Despite a recent pullback from peak prices, TD Securities expects aluminium prices and US Midwest premiums to remain elevated due to ongoing supply constraints and declining inventories. The firm anticipates that the US Midwest premium could rise further above current highs as the supply squeeze intensifies [1].
CONCLUSION
Aluminium markets are facing a severe supply shock driven by Gulf conflict-related disruptions, resulting in multi-year high prices and premiums. TD Securities projects continued elevated prices and a deepening market deficit, signaling high market impact and persistent supply risks for the foreseeable future.