While investors remain fixated on oil, gold, and the Federal Reserve, aluminum – the metal behind automotive, aerospace, packaging, and power infrastructure – is experiencing the biggest disruption of the century, so far.
“The scale of the supply shock we’re seeing in the aluminum market is probably the largest single supply shock a base metals market has suffered in the post-2000 era. We are already in a black swan event. No one could have foreseen something on this scale,” Mercuria’s analyst Nick Snowdon said, according to Reuters. His firm estimates a 2 million ton deficit by the end of the year.
The Gulf region is a large source for the global market. Its producers account for about 9% of global primary aluminum supply – 6.45 million tons a year. With the Strait of Hormuz disrupted, force majeure declarations mounting, and damage reported at key facilities, the problem isn’t just what metal can’t get out. It is also what raw materials, especially alumina, can’t get in.
The situation leaves the two most exposed markets, Europe and the U.S., scrambling for replacement supply simultaneously.
The Energy Bottleneck
Europe is particularly vulnerable since it has spent years hollowing out its smelting base. Structurally high power costs, carbon pricing, and increasingly tight environmental rules have all squeezed primary …
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