The global aluminium market is facing an unexpected supply disruption due to the conflict in the Middle East, potentially leading to significant shortages this year, according to Mercuria’s lead metals analyst, reported Reuters.
The Middle East contributes approximately seven million tonnes (mt) of aluminium annually, representing around 9% of the global supply.
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The metal plays a crucial role in the transport, construction and packaging sectors.
Mercuria metals and mining research head Nick Snowdon said on the sidelines of the Financial Times Commodities Global Summit in Lausanne, Switzerland: “The scale of the supply shock we are seeing in the aluminium market is probably the largest single supply shock a base metals market has suffered in the post-2000 era.
“We are already in a ‘black swan’ event. No one could have foreseen something on this scale,” he told Reuters.
Supply concerns arising from the US-Israeli conflict with Iran have led to increased activity on the London Metal Exchange, driving aluminium prices to a four-year peak of $3,672/t on 16 April.
Mercuria predicts a minimum shortfall of around 2mt of aluminium by the year end.
Snowdon stated that this figure could be conservative, depending on whether alumina supplies through the Strait of Hormuz allow certain smelters to resume operations soon.
“That shortfall compares with about 1.5mt of visible inventory and just over 3mt of total global stock, including non-visible units, leaving the market with limited buffers,” Snowdon added.
A more significant deficit could occur if the conflict continues and alumina flows to the Gulf are restricted.
China’s production is capped at 45mt per annum, while the US and Europe have limited dormant capacity to reactivate.
According to Snowdon, these regions are particularly vulnerable due to low stock levels.
Data from Trade Data Monitor indicates that the US imported nearly 22% of its 3.4mt of aluminium from the Middle East last year.
Europe sourced approximately 1.2mt, or 18.5%, from the region.
