TD Securities’ Global Strategy Team highlights that Aluminium has become a key casualty of Gulf conflict-related disruptions, with Bahrain and Qatar smelters curtailing output and force majeure declared at Alba. They project a sizeable 1.9Mt market deficit in 2026 and expect LME prices and US Midwest premiums to stay elevated as supply constraints and inventory drawdowns intensify.

Gulf conflict drives tightening deficit

"War in the Persian Gulf has seen Bahrain shipments stop, Qatar's Qatalum smelter set to shut and the Alba facility in Bahrain declare force majeure while seeking alternative shipping solutions. This combination of outright production stoppages or slowdowns is likely to add up to some 1.3Mt this year, which puts this market on the way toward a large 1.9Mt deficit."

"Over 5Mt of primary metal are shipped through the Strait of Hormuz each year by smelters in Bahrain, Qatar, Saudi Arabia and the United Arab Emirates. At the same time, vast quantities of bauxite and alumina travel the other way to feed the smelters, which means that if this seaway is closed for a prolonged time, more closures may occur."

"This supply chaos has driven LME prices to as high as $3,534/t, which was a level not seen since 2022, when Russia was sanctioned after its invasion of Ukraine. US and European premiums also reached multi-year highs."

"Despite the drop from recent highs, prices are expected to remain elevated due to the growing supply squeeze caused by the Middle East conflict driven production disruptions and the pending plunge in inventories."

"Lifted by the 50% import tariff, the US Midwest premium, which is hovering around $2,400/t, is also expected to move somewhat above the current highs."

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