The Middle East conflict has caused the greatest disruption on the aluminum market in years. The effects are already being felt by key industries – from construction, through industry, to transport and the renewable energy sector. Even if the conflict ends quickly, it may take many months to rebuild production in the largest steelworks.
As Andy Home, a journalist from Reuters, points out, the destruction of the Al Taweelah complex – one of the largest aluminum smelters in the world, located in Abu Dhabi – was a significant blow to the market. Additionally, production was limited by the Aluminum Bahrain and Qatar Aluminum plants, which further reduced the supply of metal from the region.
Disruptions to maritime transport, especially in the Strait of Hormuz, also add to market pressure. Logistical difficulties limit the pace of aluminum deliveries to global markets, increasing the risk of shortages.
According to Wood Mackenzie's forecasts quoted by Reuters, the global aluminum market may face challenges this year a deficit of 4 million tons metric. The most vulnerable are customers from the USA and Europe, where restrictions on aluminum trade with Russia and China have been in force for years.
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Aluminum supplies are depleting at an alarming rate
The scale of tensions is best demonstrated by data from commodity exchanges. Just a decade ago, aluminum stocks in the warehouses of the London Metal Exchange exceeded 5 million tons. Today they are approximately 400 thousand tonea significant part of which is aluminum from Russia, which is subject to sanctions and is less accessible to Western customers, reports Reuters.
The situation in the United States is even more tense. Aluminum stocks in CME warehouses have shrunk by about 70% since the beginning of the year., to only 1,864 tons, which further increases pressure on the North American market.
As a result, the fight for metal from outside Russia is intensifying. In March, traders massively withdrew 98,000. tons of Indian aluminum from LME registers, only to restore most of this amount a few weeks later. The price spread between spot delivery and three-month contracts has risen to its highest levels since 2007.
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The West has limited room for maneuver
The greatest problems with the availability of aluminum may occur in the USA and Europe. A theoretical solution would be supplies from China – the largest aluminum producer in the world. However, Beijing mainly exports semi-finished products, not primary aluminum, which is needed by Western customers. Additionally, trade relations with China are burdened with customs barriers.
Russia, which has a wide range of primary aluminum and alloys, remains an alternative. Some Japanese companies have already resumed purchases of Russian metaldespite previous limitations. For US and EU companies, however, this would mean the need to obtain regulatory approvals.
The situation in the United States is also complicated by the decision of the Donald Trump administration to increase customs duties on aluminum imports up to 50 percent. As a result, the price of aluminum imported to the American market is currently over PLN 2.5 thousand. hole. per ton higher than the LME quotations. Meanwhile, the LME futures price itself has already reached four-year highs — approximately $3,580 per ton.
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The risk of production paralysis is increasing
Manufacturers of packaging, automotive components and energy infrastructure indicate growing problems with securing supplies for the second half of the year. This means the risk of production delays, the need to renegotiate contracts and passing on higher costs to end customers.
Bloomberg analysts emphasize that a similar mechanism was visible in 2022, when shortages of aluminum and energy quickly translated into an increase in the prices of apartments, cars and household appliances. The current crisis may have even more lasting effects because it affects both the supply of raw materials and its logistics.
