Market Update: We break down the business implications, market impact, and expert insights related to Market Update: Aluminium shortage affects US economy – Full Analysis.
With attacks on the aluminium smelters in the Middle East over the weekend, Iran struck at major suppliers to the United States of a strategic metal the world’s biggest economy does not produce nearly enough of domestically, analysts said.
Before the weekend, disruption from the Iran war centred around the difficulty of shipping aluminium and raw materials through the Strait of Hormuz, which has been effectively closed by Tehran.
But on Saturday, Emirates Global Aluminium said its roughly 1.5 million metric tonnes per year Al Taweelah site in Abu Dhabi, in the UAE, had sustained significant damage from Iranian attacks.
The company has not since provided an update on operations.
But the attacks have abruptly shifted concerns from temporary shipping snarls to a potentially more serious threat to production in the region.
“That changes the nature of the risk,” Paul Adkins, head of aluminium consultancy AZ Global said .
London Metal Exchange aluminium prices reacted leaping 6 per cent to $3,492 a tonne, close to a four-year high.
“In this sort of market, when you suddenly take out 3m tonnes of capacity, it cannot be replaced,” said Panmure Liberum analyst Tom Price.
Aluminium, widely used in cars and packaging and named on the list of 60 minerals the US government deems critical, is now seeing supply-chain risks turn into reality.
The US has a 60pc net reliance on aluminium imports, according to the US Geological Survey.
Of the 3.4m tonnes of total US imports of primary and alloyed aluminium last year, supplies from the Middle East accounted for nearly 22pc, according to information provider Trade Data Monitor.
“There’s no direct link to the US military other than that some of their metal might eventually go into military application through a long chain of changing hands and processing,” said Wood Mackenzie senior research manager Uday Patel.
Wood Mackenzie estimates US military and defence industries consume 450,000 tonnes of aluminium annually.