Institutions: Middle East capacity disruptions will further drive global aluminum electrolytic shortage

Ping An Securities believes that although the current situation in the Middle East still has significant uncertainty, a substantial amount of electrolytic aluminum production capacity has already been affected and has resulted in certain (definite) production reductions. Even if the situation shows a short-term marginal easing, idled capacity still needs time to resume, and supply reductions may be difficult to make up for promptly. Electrolytic aluminum may therefore be one of the industrial base metal products with the highest level of certainty in fundamentals right now. Considering the current low overseas inventory levels and changes in spot premiums/discounts, the supply-demand balance has already tightened rapidly. As the conflict drags on, it is expected that the supply-demand shortfall may still have further room to expand, and the aluminum price mid-point may continue to be pushed higher. Domestic electrolytic aluminum producers have controllable costs and are expected to benefit fully from any rise in aluminum prices.

Industrial Securities (Xingye Securities) believes that currently, Middle East electrolytic aluminum production capacity is gradually being reduced due to the impact of the conflict. If the conflict continues, Middle East electrolytic aluminum production capacity may again undergo further production cuts due to factors such as shortages of raw materials, damage to energy facilities, and damage to equipment at aluminum plants, thereby further disrupting global electrolytic aluminum demand. In addition, the production capacity that has already been cut needs maintenance and system restoration; ramping back up may require 6–12 months. Therefore, even if the conflict eases, because the restart of electrolytic aluminum has a lag, it will still have a sustained impact on electrolytic aluminum supply within the year. Overall, without considering the Middle East conflict, in 2026 the incremental contribution from overseas newly added capacity is limited. Global electrolytic aluminum will maintain a tight-but-stable balance. The disruption to Middle East capacity will further drive global electrolytic aluminum tightness; supply disruptions may push aluminum prices to rise to new highs again. Going forward, the key focus will be on changes in overseas electrolytic aluminum production capacity.