Core viewpoint: By April 2026, the geopolitical conflict in the Middle East has spread from the energy sector to industrial metals. Global top trader Mercuria has issued a warning that the aluminum market is experiencing the largest single supply shock of the century. Affected by the blockade of the Strait of Hormuz and the attack on smelters, it is expected that the global aluminum supply gap will reach 2 million tons by 2026, far exceeding the global inventory buffer capacity of about 3 million tons. LME aluminum prices have broken through $3600/ton, reaching a four-year high. The European and American automotive and aviation industry chains are facing severe risks of raw material shortages.

1、 Crisis characterization: the biggest single supply shock of this century

1. Black Swan Event Outbreak

Nick Snowdon, Chief Metal Analyst at commodity trader Mercuria, pointed out that the supply chain disruptions caused by the Middle East war have shifted the aluminum market from tight balance to deep shortages. He bluntly stated that this is the biggest single supply shock to the base metal market since 2000, and its scale far exceeds market expectations.

2. Proportion of production capacity and gap calculation

Capacity weight: The annual aluminum smelting capacity in the Middle East is about 7 million tons, accounting for 9% of the global supply. This region is not only a production area, but also a logistics hub connecting Europe and Asia.

Gap size: Mercuria estimates that the market will face a supply gap of at least 2 million tons from now until the end of the year. This estimate is conservative, provided that logistics in the Strait of Hormuz can improve in the short term. If the blockade continues, the gap will further widen.

2、 Impact mechanism: the ‘double rupture’ of the supply chain

1. Physical interruption: from raw materials to finished products

The conflict not only hinders the export of oil and gas, but also directly cuts off the lifeline of the aluminum industry chain:

On the raw material side, the transportation flow of alumina (a key raw material for aluminum smelting) through the Strait of Hormuz has sharply decreased, causing Middle Eastern smelters that rely on imported raw materials to face a “rice shortage”.

Output end: Core smelters such as Emirates Global Aluminum (EGA) and Bahrain Aluminum have reduced production and stopped operations due to attacks or energy outages, resulting in a sharp drop in physical output.

2. Inventory buffer is on the brink of depletion

The current global explicit inventory of aluminum is about 1.5 million tons, and the total inventory (including implicit) is only slightly higher than 3 million tons. The shortfall of 2 million tons means that the inventory buffer will be rapidly depleted. JPMorgan warns that the aluminum industry has fallen into a ‘black hole’, and even if a peace agreement is reached, it will take several months for shipping to return to normal levels, making it difficult to bridge the supply-demand gap in the short term.

3、 Regional impact: Europe, America, Japan, and South Korea are the first to bear the brunt

1. Extremely high dependence on imports

Europe: Last year, it imported approximately 1.2 million tons of primary aluminum and alloys from the Middle East, accounting for 18.5% of its total imports.

The United States: Nearly 22% of the 3.4 million tons of aluminum imported last year came from the Middle East. According to data from the US automotive lobbying group, about 70% of local car manufacturers’ aluminum imports rely on Middle Eastern sources.

East Asia: Japan, South Korea, and Southeast Asian countries heavily rely on Middle Eastern primary aluminum, and S&P global analysts warn that Japan is the country most affected by shortages.

2. Price transmission and cost impact

Since the escalation of the conflict at the end of February, aluminum prices have risen by about 13%. LME aluminum prices hit a four-year high of $3672 per ton on April 16th. For the automotive (engine parts, body), aviation (fuselage), and packaging (cans) industries, the soaring cost of raw materials will directly squeeze profit margins.

4、 China’s Role: Domestic Demand Dominates, Export Window Hidden

1. Domestic supply and demand are relatively independent

The Chinese aluminum industry chain is relatively closed, with a slight year-on-year increase in primary aluminum production in March and a significant increase of 87% in alumina imports (reaching 340000 tons), indicating that China is indirectly affected by external shocks by increasing raw material imports to ensure its own supply.

2. Export arbitrage opportunities

The widening price difference between domestic aluminum prices (Shanghai aluminum) and overseas aluminum prices (LME), coupled with a shortage of overseas supply, may open an arbitrage window for aluminum exports. Domestic aluminum processing enterprises with cost advantages are expected to undertake some overseas transfer orders.

5、 Market analysis and risk warning

Short term trend judgment:

Aluminum prices will maintain a pattern of high volatility and strong tendency. The core driver has shifted from macro emotions to physical shortages. As long as the risk of navigation in the Strait of Hormuz is not relieved, the overseas premium will continue to rise.

Risk statement

Geopolitical persistence risk: If the US Iran negotiations break down and the conflict becomes prolonged, the interruption of alumina supply will lead to the permanent withdrawal of Middle Eastern production capacity, and the gap may expand to over 3 million tons.

Lagged transmission of the industrial chain: The automotive, aviation, and other long cycle manufacturing industries are still consuming inventory, and may face an extreme situation of “orders but no raw materials” in the next 2-3 months.

Policy intervention risk: European and American governments may introduce aluminum export restrictions or strategic reserve release policies, disrupting market pricing mechanisms.