Concerns over supply crunch in the aluminum market are rising

Global balances in the aluminum sector were severely shaken by the attacks that took place over the weekend. Following the Iran-linked attacks on the Emirates Global Aluminium (EGA) facilities in the United Arab Emirates and the Bahrain-based Aluminium Bahrain (Alba) plants, prices in global markets have risen rapidly. Concerns over a supply crunch for aluminum, which is critical for various sectors such as aviation, food packaging, and renewable energy, have come to the fore.

Emirates Global Aluminium described the damage at its Abu Dhabi facility as "significant," while Aluminium Bahrain announced that it has begun the process of assessing the damage at its plants. Given that the Middle East accounts for approximately 9 percent of total global aluminum production, it is noted that long-term production disruptions in this region will not be easy to compensate for.

Regional producers, who have recently struggled to access raw materials due to the closure of the Strait of Hormuz, are now facing an even more challenging situation following the attacks. Industry players emphasize the difficulty of resolving these new disruptions in the supply chain in the short term.

According to London Metal Exchange (LME) data, aluminum stocks are currently at their lowest level in the last 20 years. According to Goldman Sachs' analysis, a supply deficit of 900 thousand tons could occur in the second quarter of the year, and current stocks are projected to be able to meet demand for only 45 days.

Aluminum prices on the LME saw a sudden spike, reaching 3,428 dollars per ton. In the European market, there has been a 63 percent increase in aluminum billet premiums since the day the war began. Furthermore, the fact that spot prices have risen above futures prices indicates that finding physical product is becoming increasingly difficult and is heightening market anxiety. This situation marked the highest level seen since 2007.

On the other hand, producers outside the Middle East responded positively to the developments. Shares of the Australian company South32 rose by 8.2 percent, while Aluminum Corp of China gained approximately 9 percent in value. Experts warn that if the supply shortage in the region continues, price pressure could be sustained on a global scale.