Aluminium deficit persists despite easing Middle East tensions
At a Glance
The desk interprets ongoing aluminium market dynamics as a persistent deficit, underscored by geopolitical improvements but hindered by enduring supply constraints. Per the full note from ING Think, even with reduced tensions in the Middle East, the broader supply picture remains strained, anticipating a global aluminium deficit of 1.8 million tonnes this year. This contrasts with a market that has experienced a significant production loss of approximately 3 million tonnes due to earlier geopolitical unrest. The consensus around aluminium's value trajectory may become increasingly critical as the market grapples with these disparities amidst a lack of immediate economic indicators on the calendar.
Key Takeaways
- 01The aluminium market is in a supply deficit of 1.8 million tonnes for 2023.
- 02Middle Eastern geopolitical improvements have not resolved supply chain issues.
- 03Recovery of aluminium production from smelters is expected to be slow.
- 04Differing firm perspectives highlight inherent market uncertainty.
Full Analysis
What the desk is arguing
The desk posits that while geopolitical tensions have dissipated, the aluminium market continues to face a significant supply shortfall. The easing of concerns regarding the Middle East has not substantially altered the fundamental supply situation, with the ongoing forecast pointing to a deficit of 1.8 million tonnes this year according to the insights from ING Think.
Despite improved geopolitical conditions, the impact of previously lost aluminium production remains evident. Historical outputs reflect that about 3 million tonnes have been sidelined owing to conflicts, indicating a long recovery ahead for smelters that cannot quickly restore operations. Hence, the aluminium market remains fundamentally tight even as uncertainties lessen in related geopolitical contexts.
Where it sits in our coverage
Our current consensus target for aluminium sits at 1.075, with a range spanning from 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This desk's view aligns closely with jpmorgan, placing it towards the upper bound of the target range, diverging more significantly from bofa, suggesting a more conservative outlook.
How other firms see it
Aligned views from firms such as jpmorgan suggest a similar optimistic outlook regarding aluminium, while firms like bofa offer a more cautious perspective on its price recovery. This juxtaposition reflects differing approaches to current supply deficit assessments.
Price trajectories within commodities markets should be monitored closely, specifically with respect to energy flows and materials like copper, as they interconnect with aluminium's performance in global markets.
Market Implications
Watch for aluminium prices around the consensus target of 1.075; any confirmation of supply recovery or renewed geopolitical threats could shift this dynamic significantly. The landscape is especially sensitive to shifts in energy prices that impact production costs.
From the original
Articles Aluminium deficit persists despite easing Middle East tensions 15:26 Commodities, Food & Agri Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Geopolitical tensions have eased, reducing upside risks for aluminium prices, but market balances re
Related speeches
4 itemsAluminium deficit persists despite easing Middle East tensions
Global Commodities: Seeing the Invisible
The desk posits that persistent commodity tightness, particularly in natural gas and aluminum markets, underscores broader supply chain vulnerabilities resulting from geopolitical tensions, notably the closure of the Strait of Hormuz. Per the full note from J.P. Morgan, despite the implementation of a Memorandum of Understanding aimed at easing pressures, traders should remain wary of ongoing constraints that could disrupt pricing dynamics. This insight highlights the interconnectedness between energy commodities and foreign exchange movements, as any sustained price spike in these sectors could affect currency pairs like AUD/USD and CAD/USD, leveraging commodities' influential role on the broader economy.
Global Commodities: What’s New?
The desk is observing structural changes in global commodities markets, particularly the elevated premiums for Asian LNG over European benchmarks and the sidelining of precious metals; the implications of ongoing negotiations between Iran and the US are central to this narrative. Per the full note [source], the elevated prices in Asian LNG reflect a supply-demand imbalance as markets adjust to geopolitical realities. Consensus among analysts appears to have shifted, and with no significant calendar events in the next 30 days, traders should be vigilant about shifts in commodity pricing and their potential spillover effects into currency markets.
Global Commodities: Mind the Metals
The desk emphasizes that ongoing geopolitical tensions in the Middle East are significantly impacting commodity markets, particularly metals. Per the full note from J.P. Morgan, supply-side disruptions due to infrastructure attacks and shipping challenges are exacerbating the situation. This is reflected in the heightened volatility and price pressures observed in both precious and base metals. The consensus target for metals remains under scrutiny as traders navigate these uncertainties.
More from ING THINK
5 items- ING THINK
Polish activity data slows further in 2Q but 3.4% growth still achievable for 2026
- ING THINK
FX Daily: Lack of GBP political premium cuts both ways
- ING THINK
ING lifts South Korea 2026 GDP growth forecast to 4% from 3%
- ING THINK
Germany’s reform train is picking up steam
- ING THINK
The Commodities Feed: Oil rises amid shaky start to US-Iran ceasefire