Aluminium markets are now facing a “structural deficit” as escalating supply disruptions at Gulf smelters transition the sector from a mere logistics problem into a deeper crisis, with little chance of an immediate recovery and risks pointing towards further price increases, ING Economics said in an analysis.
The aluminium market has moved into a significant deficit following further escalation in the Middle East.
What initially appeared as a disruption to shipping and logistics has now evolved into a material supply shock, with multiple Gulf smelters operating well below capacity.
Disruptions hit production, capacity
Operations at Emirates Global Aluminium’s Al Taweelah smelter have recently been halted, while both Aluminium Bahrain (Alba) and Qatalum continue to operate at reduced rates, with Alba specifically having undergone a sharp reduction in output.
Although the Middle East contributes approximately 9% to global aluminium production, its share of seaborne supply is significantly greater, according to the ING report.
Consequently, any interruptions in the region profoundly affect market availability and pricing.
Meanwhile, ING Economics’ mid-March estimates indicated that approximately 560,000 tons of annual capacity was impacted, specifically around 300,000 ton at Alba and 260,000 ton at Qatalum.
However, given that Alba is now running at roughly 30% capacity and Qatalum at about 60%, the affected capacity has escalated to an estimated 3 million tons, ING said.
This represents nearly 50% of the region’s total production.
“Based on current operating rates, the aluminium market would be in a deficit of close to 2.9Mt if disruptions persisted through the remainder of the year,” Ewa Manthey, commodities strategist at ING said in the analysis.
However, at elevated prices, we expect demand destruction, destocking and a partial supply response from China to offset part of the supply shock, resulting in a base case deficit of around 2Mt.
Disruptions largely priced
ING’s energy market outlook suggests that disruption will likely reach its maximum early in the year before gradually subsiding.
Although supply constraints persist, ING anticipates that further price increases in aluminium will be contained by a combination of reduced demand, the drawing down of inventories, and higher supply from China.
“As a result, aluminium prices remain elevated but do not extend materially higher from current levels,” Manthey added.
While most metal prices declined, aluminium’s price rose sharply, climbing a significant 13% since the end of February to over $3,600 per ton.
This marks its highest valuation since late March 2022, shortly following the start of the conflict in Ukraine.
The sharp increase in the spot price of aluminium which traded nearly $90 above the 3-month forward price earlier this week demonstrated that the current market dynamics are largely fueled by fears of an immediate physical shortage, Barbara Lambrecht, commodity analyst at Commerzbank AG, said in a recent report.
The premium represents the highest level seen since March 2007.
“Furthermore, the futures curve on the aluminium market, which was already in backwardation prior to the war in Ukraine, is now falling even more sharply,” Lambrecht said.
The nearest-month futures contract is trading almost 10% higher than the one due in a year’s time, whereas the price differential was barely half that level a month ago.
Risks skewed to upside
Should supply chain disruptions continue or worsen, the recovery of aluminium supply will likely be hampered.
Further smelter curtailments are possible, especially given the intensifying restrictions on alumina supply and ongoing logistics problems.
In such a scenario, aluminium prices could exceed $4,000 per ton, according to Manthey.
However, the resulting demand destruction would likely cause prices to decline later in the year, even as the market maintains a structurally tight balance, she noted.
Additionally, Commerzbank’s calculations also showed that aluminium prices could reach the $4,000 mark if the Strait of Hormuz remained closed till May.
“However, the price would still remain below the record high of USD 4,073 set in March 2022,” the German bank said.
While some recovery is expected in our base case, the balance remains tight, with limited downside and clear upside risks under prolonged or severe disruption scenarios.
https://invezz.com/news/2026/04/17/aluminium-to-stay-in-deficit-through-2026-downside-limited-ing/
