Middle Eastern Aluminum's "heart" repeatedly struck! London Aluminum opens with a nearly 6% jump, and aluminum stocks surge wildly.

With Iran attacking two production bases in the Middle East over the weekend, international aluminum prices surged significantly at the opening on Monday, as a series of attacks may exacerbate aluminum supply disruptions in the region, which holds a substantial share of global aluminum production.

Market data shows that aluminum futures prices on the London Metal Exchange (LME) rose nearly 6% during early trading, reaching $3,492 per ton, and have since temporarily reverted to around $3,426.

As a result, the stock prices of many aluminum companies in the Asia-Pacific market also strengthened. In the A-shares market, China Aluminum rose over 3%, Nanshan Aluminum increased by 4%, and Tianshan Aluminum reached its daily limit.

The largest aluminum producer in the Middle East, Emirates Global Aluminium, announced on Saturday that earlier that day, its Tawi’lah production facility in the Khalifa Economic Zone of Abu Dhabi was attacked by Iranian missiles and drones, suffering severe damage. The facilities attacked include a smelter expected to produce 1.6 million tons of cast aluminum by 2025 and a refinery providing alumina (the main raw material for the metal) to the smelter.

According to consulting firm Harbor Aluminum, the UAE is the fifth-largest aluminum producer in the world. The official website of Emirates Global Aluminium states that for every 25 tons of aluminum produced globally, 1 ton comes from Emirates Global Aluminium. This accounts for about 4% of global capacity.

In addition to Emirates Global Aluminium, Bahrain Aluminum Company, which houses the world’s largest aluminum smelter, also stated on Sunday that its plant was attacked by Iran on Saturday. “Bahrain Aluminum Company is assessing the extent of facility damage and will continue to focus on maintaining operational resilience and ensuring employee safety,” the company stated.

Prior to this, Bahrain Aluminum Company had announced on March 15 that due to ongoing supply and transportation disruptions in the Strait of Hormuz, it had initiated phased shutdowns of three production lines to “maintain business continuity,” affecting 19% of its total capacity. Previously, the company’s annual aluminum production was 1.6 million tons.

Although aluminum is the most abundant metal on Earth, it is crucial for the operation of the global economy. It is an indispensable material in industries such as electronics, transportation, construction, and solar panels, as well as packaging.

Analysts point out that the war in the Middle East had already significantly pushed up aluminum prices, as smelters in the region were unable to ship out metals or import raw materials. The latest attacks undoubtedly pose risks of further deteriorating the situation— even if the Strait of Hormuz reopens, supply may be disrupted for an extended period.

Earlier this month, aluminum prices soared to a four-year high, and although they have since retreated, prices are still more than 4% higher than levels on February 27.

Citigroup analyst Ephrem Ravi wrote in a report that even after the direct risks of attacks subside, the consequences of any closures may persist, as aluminum smelters require three to six months to fully resume production.

A report from commodity brokerage StoneX states that excluding Iran, the overall aluminum smelting volume in the Gulf region is expected to account for about 8% of the global total by 2025.

CITIC Securities recently noted in a research report that with the resurgence of conflict between Israel and Palestine, risks to aluminum production capacity, shipping capacity, and energy supply in the Middle East have significantly increased. Subsequent disruptions in the aluminum supply chain in the Middle East and potential secondary energy crisis risks abroad cannot be ignored. Reviewing the energy crisis of 2021-2022, aluminum prices and the sector saw maximum increases of 60%/100%. Looking ahead, concerns over aluminum supply along the chain may lead to price increases exceeding previous expectations. Coupled with a strong long-term supply-demand logic in the aluminum industry, we remain optimistic about the upward valuation trend in aluminum sector prices.

(Source: Financial Association)