Aluminium: Structural deficit and upside risk persist – ING

ING’s Warren Patterson and Ewa Manthey note that Aluminium prices briefly dropped as Iran pledged to keep the Strait of Hormuz open during a ceasefire, but renewed closure has refocused markets on supply risk. They stress that Middle East disruptions, including at major smelters, have pushed Aluminium into structural deficit, with tight supply likely to underpin prices despite near-term volatility.

Middle East supply shock drives deficit

"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."

"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."

"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."

"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."

"Given the difficulty of restarting smelting capacity, tight supply conditions are likely to continue supporting aluminium prices despite near‑term volatility."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)