Aluminium set for supply shock, prices may breach $3,400 this yr?

Hormuz closure and Gulf smelter disruptions may fuel severe supply shortages, but any US-Iran peace deal could sharply reverse prices

Commodity Desk

MUMBAI

Global aluminium markets are staring at a deeper supply crisis in 2026 as geopolitical tensions in West Asia continue to disrupt production and trade routes, according to a report by ANZ Research. 

 The report warned that the ongoing US-Iran conflict and the closure of the Strait of Hormuz could widen the global aluminium deficit to 2.7 million tonnes this year while keeping prices above $3,400 per tonne.

  The research said aluminium has emerged as one of the worst-hit commodities due to the conflict because the West Asian region plays a critical role in global supply chains. The region accounts for nearly 9% of global primary aluminium output and around 20% of supply outside China.  A large share of the region’s smelting capacity depends on imported alumina and bauxite shipped through the Strait of Hormuz, making the route strategically important for uninterrupted production. The report noted that attacks on aluminium smelting facilities in the Gulf region have already started affecting output levels.  Data showed aluminium production in the region declined 7% y/y in March. 

 Strikes on Emirates Global Aluminium’s Al Taweelah plant and ALBA facilities reportedly led to production losses of nearly 1.6 million tonnes. Nearly 3 million tonnes of aluminium production could be impacted globally if disruptions persist. This may pull down global aluminium production by 1.8% to 72.6 million tonnes in 2026. Although China has been ramping up production due to favourable margins, analysts said the country’s regulatory cap of 45 million tonnes would prevent any meaningful offset to the global supply shortfall.

The tightening supply situation has also sharply increased regional aluminium premiums.  In Europe, aluminium premiums have surged nearly 50% to around $600 per tonne since the conflict escalated, mainly due to reduced exports from Persian Gulf countries. 

   In the US, Section 232 tariffs have reportedly pushed landed aluminium costs to nearly $5,700 per tonne, forcing Canadian exporters to seek alternate markets. 

Despite concerns over slowing industrial activity and weaker global growth, ANZ said supply shortages are expected to keep aluminium prices elevated.

   Demand growth could moderate to 2-2.3% in 2026 from 3% last year as industries shift towards substitutes in packaging and automobile manufacturing.         

(With inputs  from Informist)