Aluminium traders brace for turmoil as Iran crisis chokes supply

The Iran war is sending shockwaves through the global aluminium industry. Manufacturers are facing a spike in prices and traders expect widespread suspensions of supply contracts, unless flows through the Strait of Hormuz resume quickly. Aluminium is the most ubiquitous industrial metal after steel, but in recent years the market has been periodically rocked by supply shocks.

They have exposed fragilities in the complex network of bauxite mines, alumina refineries and aluminium smelters that supply to manufacturers around the world – often in highly specialised forms that cannot readily be replaced. Ewa Manthey, commodities strategist at ING Groep, said: “While smelters typically hold around three to four weeks of alumina inventories – allowing them to absorb short disruptions – prolonged constraints would quickly translate into production risk. That would tighten global supply meaningfully.” For aluminium traders, the effective halt on shipments on Tuesday (Mar 3) has already sparked turmoil, and each day of delays causes further complications in consumer markets.

The metal is widely used for a range of products – from auto parts and appliances, to beverage cans and window frames – and it is prized by manufacturers for its abundance and low cost, relative to competing materials like copper. But even short disruptions can cause commercial havoc for factories who tend to buy it on a just-in-time basis. While US President Donald Trump said on Tuesday that the US Navy will escort oil tankers and other commercial vessels through Hormuz, traders are sceptical that the flows through the critical passageway will quickly return to normal.

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The conflict has exposed another severe choke point in the supply chain that could spark chaos across the industry, with manufacturers in Europe, Asia and the US facing shortages in spot supply if Middle East smelters are overcome by disruptions to shipments of outbound metal and incoming raw materials. Qatar’s state-owned producer has already cut output, while the United Arab Emirates’ (UAE) top supplier is seeking to draw down stocks from outside the region to avoid disruptions to customers. Traders are pulling inventories from exchange warehouses in Asia. Some say – while speaking privately – that they are expecting formal suspensions of supply contracts from multiple producers in the Gulf region within days.

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