Key Moments
- Aluminum prices briefly dropped more than 5.5% after Iran said it would keep the Strait of Hormuz open during a 10-day ceasefire.
- Renewed closure of the Strait and disruptions at key Middle East smelters have pushed the aluminum market into structural deficit.
- Capacity losses of nearly 3 mtpa in the Middle East could expand the global supply shortfall to 2Mt, keeping prices supported despite volatility.
Geopolitics Drive Sharp Price Swings
ING analysts Warren Patterson and Ewa Manthey report that aluminum prices experienced a sharp, but short-lived, decline after Iran pledged to keep the Strait of Hormuz open during a 10-day ceasefire between Israel and Hezbollah. They note that this announcement briefly raised hopes of easing tensions and improved trade flows.
According to the analysts, “LME aluminium prices fell by over 5.5% at one point on Friday after Iran announced it would keep the Strait of Hormuz open during a 10‑day ceasefire between Israel and Hezbollah. The move briefly fuelled optimism for de-escalation. The critical route for global aluminium trade had been closed since late February following US and Israeli strikes on Iran. Prices climbed to a four‑year high last week amid supply disruptions.”
That optimism did not last. As they highlight, “However, the Strait was closed again over the weekend, highlighting the fragility of the ceasefire and keeping geopolitical risks firmly in focus. The region accounts for roughly 9% of global aluminium production. It’s a key supplier to Europe, leaving the market highly exposed to renewed disruptions.”
From Logistical Disruption to Structural Deficit
Patterson and Manthey emphasize that the situation has evolved from a shipping bottleneck into a deeper supply imbalance. “As outlined in our latest note, the shock is no longer just logistical. Aluminium has moved into a structural deficit, with risks skewed to the upside if disruptions persist.”
Their assessment underscores that ongoing supply constraints are no longer confined to transport routes, but are now embedded within production capacity itself.
Middle East Smelter Curtailments Hit Global Supply
The analysts detail specific disruptions across major smelters in the Middle East, a region that plays an important role in global aluminum production and European supply. They write: “Disruptions at Emirates Global Aluminium’s Al Taweelah smelter, reduced output at Alba, and earlier curtailments at Qatalum could remove nearly 3 mtpa of capacity, almost half of Middle East production. This would potentially widen the global supply deficit to 2Mt.”
These developments underscore how sensitive the global market is to production cuts in this region, given its share of worldwide output and its role as a key supplier to Europe.
| Factor | Detail |
|---|---|
| Price reaction | “LME aluminium prices fell by over 5.5% at one point on Friday” after Iran’s Strait of Hormuz announcement |
| Regional production share | “The region accounts for roughly 9% of global aluminium production.” |
| Potential capacity loss | “Nearly 3 mtpa of capacity, almost half of Middle East production” |
| Possible global deficit | “Potentially widen the global supply deficit to 2Mt.” |
Outlook: Tight Market Supports Prices
Looking ahead, the ING analysts argue that constrained supply is likely to keep a firm floor under aluminum prices, even as short-term moves remain volatile. They conclude, “Given the difficulty of restarting smelting capacity, tight supply conditions are likely to continue supporting aluminium prices despite near‑term volatility.”
The analysis suggests that as long as disruptions in the Middle East persist and the Strait of Hormuz remains vulnerable to renewed closures, the balance of risk for aluminum prices remains tilted to the upside.
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