Escalating tensions threaten Middle East Aluminium exports, lifting prices and premiums amid heavy Western reliance on Gulf supply
Prolonged disruptions to Middle East aluminium exports arising from the escalating conflict between the United States and Iran could deal a significant blow to consumers in the US and Europe, given their heavy dependence on supplies from the region.
The United States and Israel launched attacks on Iran over the weekend, heightening fears of potential disruption to shipping routes, including the strategically vital Strait of Hormuz — a key artery for global energy and commodities trade. Any closure or sustained disruption of this corridor could severely impact aluminium flows from Gulf producers.
Heavy reliance on Gulf smelters
The Arabian Gulf hosts roughly 7 million tonnes of aluminium smelting capacity, accounting for about 8 per cent of global output, according to BNP Paribas commodities strategist David Wilson. Around three-quarters of Middle Eastern aluminium production is exported, making the region a critical supplier to deficit markets in the West.
Europe imported approximately 1.3 million tonnes or 21 per cent of its primary and alloyed aluminium from the Middle East and Egypt last year, according to Trade Data Monitor. The US imported nearly 3.4 million tonnes from the region, representing about 22 per cent of its total aluminium imports.
Analysts warn that a sustained disruption would have a pronounced impact on both exchange prices and physical premiums, particularly in Europe, where alternative supply sources are limited and energy costs remain elevated.
Prices and premiums spike
Aluminium prices on the London Metal Exchange (LME) climbed to a one-month high of $3,254 per metric tonne on Monday as traders factored in geopolitical risk.
Physical premiums — the surcharge paid above the benchmark LME price to cover freight, taxes and handling — have also surged. European premiums jumped to $378 a tonne late last week, up $20 since the start of the week.
In the US, premiums are already hovering around record levels at about $1.04 per lb, or roughly $2,292 per tonne. These elevated levels reflect tight supply conditions compounded by President Donald Trump’s 50 per cent import tariffs imposed in June last year, which have significantly raised the cost of foreign metal entering the country.
Rising production costs add to pressure
Beyond supply disruptions, aluminium producers are bracing for higher energy costs. Power typically accounts for roughly one-third of aluminium smelting expenses. With oil and natural gas prices climbing amid the Middle East conflict, production costs are expected to rise further, potentially squeezing margins and pushing prices higher.
The metal is widely used in transportation, construction and packaging industries, meaning sustained price increases could filter through to consumer goods ranging from cars and aircraft to beverage cans.
For US and European manufacturers already grappling with elevated input costs and trade barriers, a prolonged geopolitical standoff in West Asia could intensify supply chain stress and reinforce inflationary pressures in the months ahead.
With inputs from agencies.
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