ING’s Commodities Strategist Ewa Manthey highlights that escalating conflict in the Middle East adds significant upside risk to Aluminium in an already tightening market. With Gulf smelting capacity heavily reliant on the Strait of Hormuz, ING revises its Aluminium price forecasts higher and outlines three disruption scenarios, including a severe case where prices briefly exceed $4,000/t before demand destruction curbs gains.

Middle East tensions tighten aluminium outlook

"While oil and LNG markets are the most directly exposed to disruptions in the Strait of Hormuz, aluminium is likely to be among the most affected industrial commodities. The Gulf accounts for roughly 9% of global aluminium production and an even larger share of internationally traded metal. Yet the region produces only around 3% of global alumina and around 1% of bauxite, leaving smelters heavily reliant on imported raw materials."

"In Scenario 1, which we consider our base case, we assume a relatively short disruption to regional shipping lasting around four weeks. Exports from Gulf producers are temporarily delayed and some metal accumulates on site, particularly at Alba where deliveries have already been affected. At the same time, the disruption at Qatalum represents a genuine supply shock as production recovers only gradually following a controlled shutdown."

"In Scenario 2, disruptions persist for longer, with shipping constraints lasting several months. This would further tighten the seaborne aluminium market as export flows from the Gulf remain constrained. In this scenario, we also assume the risk of minor production curtailments across Gulf smelters if logistics disruptions persist and raw material deliveries begin to tighten."

"Scenario 3 represents a more severe disruption to shipping through the Strait of Hormuz lasting around three months. In this case, a combination of lost production, stranded metal and broader logistics disruptions could significantly tighten global aluminium availability. At these levels of tightening, prices could briefly move above $4,000/t before demand destruction begins to limit further upside."

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