Mercuria estimates the market will face, at a minimum, a deficit of roughly 2 million tons between now and the end of the year. Snowdon said this estimate may prove conservative, as it assumes a near-term improvement in alumina flows via the Strait of Hormuz #will enable some smelters to restart production this quarter.
"That shortfall compares with about 1.5 million tons of visible inventory and just over 3 million tons of total global stock, including non-visible units, leaving the market with limited buffers," Snowdon said.
A larger deficit is possible if the conflict is extended and flows of alumina - a feedstock for aluminium production - to the Gulf are limited, he added.
Middle East aluminium cannot easily be replaced. In China, the world's top producer, there is an annual output limit of 45 million tons, while the U.S. and Europe have little idled capacity that could return.