Aluminum prices were up nearly 5% yesterday following Iranian strikes on Emirates Global Aluminium’s (EGA) Taweelah facility and Aluminium Bahrain (Alba) complex over the weekend, which took out output from “two of the biggest regional players.”

The effect on the market has been instant. Switzerland-based energy and commodity trading player Mercuria Energy led the charge of firms trying to frontload supplies, taking close to 100k tons of aluminium from London Metal Exchange (LME) warehouses, sources familiar with the matter told Bloomberg.

Prices will rise further: Analysts see a worst-case scenario leading to prices as high as USD 4k per ton in extreme cases, investment firm Alpha Binwani Capital founder Ashwin Binwani told EnterpriseAM UAE.

Cue the historical precedent: The Russian invasion of Ukraine resulted in the highest prices on record, of USD 4.1k per ton in March 2022.

Who’s affected? Downstream users in the auto, aerospace, construction, and packaging industries are also likely to feel the squeeze, with no near-term alternative on the horizon currently, he said. The UAE in 2024 was the fifth largest exporter of unwrought aluminum, according to OEC.

EGA, of course, should have reserves in place. Unconfirmed estimates peg those at around 200-400k tons of supply buffers, Binwani told us. However, with 1.6 mn tons of production taken out since the Taweelah facility was damaged, the disruption is likely to be prolonged.

“In metals, disruption always travels faster than repair,” and a “prolonged outage could reshape trade flows and reposition supply chains for years,” as well as drive up risk premiums in Kezad, Binwani said.

LME supplies were already under pressure amid increased requests for aluminum sourced from markets other than key aluminum exporter Russia, which some buyers are skirting due to sanctions.

The strikes aren’t the only thing keeping inventory low: The disruption at the Strait of Hormuz limited access to essential input materials for smelters, leaving inventory stockpiles low and ill-prepared to act as a buffer against another hit to production, Bloomberg reports elsewhere. If the standstill continues, the market could be looking at prices beyond 2022’s USD 4.1k per ton high.

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