First, the Middle-East factor. The GCC plus Iran account for nearly 7 million tonnes of smelting capacity, which is about 9-10% of global aluminium output. Additionally, close to 75% of GCC production is export-oriented, with a significant share flowing into the United States and Europe.
Second, supply-side disruptions. Recent geopolitical tensions have impacted multiple smelters across the region, including Alba in Bahrain, Qatalum in Qatar, and Al Taweelah in the United Arab Emirates. Utilisation levels have been scaled back, tightening an already supply-constrained market.
Can supply recover quickly? Unlikely. JPMorgan estimates that restarting smelters of this scale could take at least 9-12 months. This could lead to a sharp tightening in ex-China markets.The brokerage expects aluminium prices to potentially rise towards $4,000 per tonne before any demand-driven correction sets in.
It has already raised its London Metal Exchange price forecast to $3,250 per tonne from $2,850 earlier, although this still remains below current spot levels.
Another key indicator to track is the copper-to-aluminium ratio, which had surged to around 4x earlier this year, making aluminium relatively attractive. It has now eased to around 3.5x, indicating a more balanced risk-reward.
The bottom line is that aluminium is likely to remain in focus, supported by supply-side shocks, slow restarts, and tightening global markets.
