Aluminum at record highs due to supply interruptions

The aluminum market is going through a period of strong volatility driven by geopolitical uncertainty. The metal reached 3,544 dollars per tonne in London, its highest level in almost four years. After this peak, the price recorded a slight correction due to a generalized massive sell-off in the financial markets and the strengthening of the dollar.

The rise is mainly due to the impact of the conflict in the Middle East, a region that accounts for approximately 9 % of the world’s aluminum supply. The hostilities have led to the suspension of deliveries in at least two relevant smelters located in Qatar and Bahrain.

In this context, immediate demand is clearly outstripping available supply. In the absence of supplies from the Persian Gulf, buyers in the United States are trying to secure alternative cargoes from Asia to maintain their supply levels.

Analysts expect the global aluminum deficit to reach 1.4 million tons this year, which would be the highest level since 2019. If the conflict drags on, experts warn that supply tensions could intensify.

Instability is also disrupting the international flow of alumina, a raw material needed to produce aluminum. Some of the shipments initially destined for smelters in the Middle East are being diverted to other countries.

This change in trade flows opens up export opportunities to China, which is absorbing part of this redirected supply.

Logistical pressure on oil trade

The energy market is also experiencing tensions stemming from logistical constraints in the region. Saudi Arabia has temporarily reduced its oil production as it tries to manage difficulties in exporting crude oil.

The usual outbound routes from the Gulf are blocked or severely limited, which has led to a build-up of oil in storage. Faced with this situation, Saudi Aramco is resorting to tenders to sell additional cargoes outside its usual contracts and is looking for new export routes through the Red Sea.

The oil trade logistics system is under increasing pressure: oil continues to be produced, but its transportation faces major obstacles. If these constraints continue, they could be passed on to energy prices on a global scale.

Fertilizers anticipate possible supply tensions

The conflict is also having an impact on the fertilizer market. The Nigerian company Dangote is receiving a higher than usual volume of orders for its urea production.

Iran is one of the world’s leading producers of this fertilizer, which is widely used in agriculture. Uncertainty about the continuity of its exports is leading many international buyers to seek alternative suppliers.

In this context, the increase in orders reflects that the market is already anticipating possible supply disruptions. Should these materialize, fertilizer prices could increase, raising agricultural production costs and putting additional pressure on food prices.