Gulf Disruptions Raise Aluminum Prices to Four-Year High

Aluminum prices have surged to a four-year high following severe disruptions in the Gulf region, where major smelters have declared force majeure and the Hormuz chokepoint has been blocked for much of this week. ZeroHedge reported that these events are creating one of the largest supply shocks in base metals markets since 2000.

The Gulf region accounts for 9% of world aluminum supply, and alumina flows through the Hormuz chokepoint remain heavily constrained.

Analysts at Mercuria, a Swiss commodities trading house based in Geneva, are warning about the global aluminum market. Mercuria traders sell, ship, store, and finance physical commodities across markets such as oil, gas, power, LNG, and metals. The firm estimates the aluminum market could face at least a 2 million-ton deficit by the end of the year, potentially worse if the US-Iran conflict drags on and alumina flows through Hormuz chokepoint remain heavily constrained.

A commodities analyst at Mercuria told Reuters that the scale of the supply shock in the aluminum market is probably the largest single supply shock a base metals market has suffered in the post-2000 era. The analyst spoke to Reuters on the sidelines of the Financial Times Commodities Global Summit in Lausanne, Switzerland. He stated, 'We are already in a 'black swan' event.'

That shortfall compares with about 1.5 million tons of visible inventory and just over 3 million tons of total global stock, including non-visible units. He warned that the most exposed supply chains to the Gulf shock are in the US and Europe. These regions rely heavily on Middle Eastern aluminum imports and already have low stockpiles.