Global Commodities: Infrastructure 101

Hello, and welcome to another episode of At Any Rate. I'm Greg Scherer, your host for today, and I head up base and precious metals research at J.P. Morgan.

The world of commodities had a few headlines to digest this week. First, the US rejected Iran's response to a proposal to end the war. Then markets gauged whether President Trump's visit to China can nudge progress in getting towards a resolution.

And lastly, flows through the Strait of Hormuz have ticked up slightly from being at near zero last week. While prices have stayed relatively subdued in May across the energy complex, pressure from commodity markets may persist even after the Strait of Hormuz reopens. This is in part due to infrastructure constraints, which we want to unpack a little bit more today.

Commodities, as opposed to some other assets, are based on fragile supply chains and complex processing facilities such as liquefaction terminals for LNG, smelters for metals, refineries for oil. We count more than 60 infrastructure objects in the Middle East that have been affected by the conflict, with about 30 of those hit by drones, missiles or debris. Today, we will deconstruct the role of infrastructure in gas and metals as well as give an overview of the damage brought on by the Middle Eastern conflict.

In this episode, I'm joined by Otar Degubadze, who leads European natural gas research at J.P. Morgan. Otar, thanks again for joining.

Maybe before we jump into the infrastructure side, as we've been doing in the last few weeks, what are you seeing, Otar, in terms of, you know, an update of where we stand or any new incremental news that you're tracking across the gas space this week? Hi, Greg, and thank you for having me. So this week, this past week, we observed two tanker crossings of Formos, both of which were originated from Qatar, and both of which were delivered to Pakistan.

So this is an interesting development and raised a lot of questions in the market of what is this like new normal? And what does this mean for a broader startup timeline for Qatar? We still see these two shipments relatively isolated from the wider developments.

A vast majority of Qatar's liquefaction facilities remain closed. As we understand, limited number of trains are operating, but they are operating at lower utilization rates, just to maintain the infrastructure and kind of keep the cost flowing and simplify the restart process when and if the conditions are correct. So both of these tankers since then remain in Pakistani port and at least one of them, recent press reports indicated Qatar is trying to lease that out.

So there are no indications that any of these tankers will be sailing back to Qatar export facilities, which also reduces the number of ships available to leave the strait and deliver more volumes to global markets. We still continue to see some exports to Kuwait, which remains within the Gulf, which has been eight cargos to date since the start of the conflict. And maybe there will be a few occasional cargos, but for wider LNG market, we still more or less have the same status quo.

Uttar, you mentioned infrastructure in that sort of summary. And I think that's where we want to really focus here. But from our perspective, maybe can we just set the scene here?

You know, we've been talking about trains and LNG and liquefication facilities. What is an LNG terminal and what ultimately infrastructure is really required to push out this natural gas to the market? Yes, I agree.

There is a lot of buzzwords that we tend to use in this industry. So in trying to simplify the process, so LNG is essentially a liquefied natural gas, which is liquefied by reducing its temperature. So to follow a supply chain in baby steps, first, the gas is produced, which is any regular gas that is consumed domestically.

So this comes from what's called upstream production, dry gas in gaseous form. Then this is shipped to LNG liquefaction terminal, which consists of multiple trains. So it's like a different units.

One terminal can have one train, it can have multiple trains, train sizes also differ dramatically. So for example, Qatari trains are called mega trains, because they have something like eight MTPA of capacity, while the new trains, for example, in the United States, they are called modular trains. And for same overall capacity, there are like 36 trains, for example, some of the recent projects that started in the US.

So once the gas is liquefied, then it reduces volume by 600 times, which makes it easier to store and ship. So then it's loaded on the specialized cryogenic vessels, which keep this gas at minus 163 degrees Celsius, which keeps it liquid, and then it is transported to demand the two destination markets, where kind of opposite is taking place, where gas is regasified from liquefied form, back into gaseous form, and then it goes to domestic pipeline system, and then goes to the various end consumers. The importance of infrastructure in LNG is that historically LNG industry started with end to end connected supply chain.

So there would not be a separate liquefaction project, separate regasification project, it was one integrated supply chain, liquefaction, ship transportation, regasification. This was seen as a one project and it was finest as a one project importantly. So that's why it's always been a very integrated market historically, and which is now obviously changing with the rise of LNG with the rise of spot emerging of US as a top supplier, etc, which is a separate topic at all.

But generally, this LNG is probably one of the most infrastructure heavy commodities because you cannot simply move it without these very specialized terminals and vessels. And from that launching point, can you just remind us again, what infrastructure damage are we tracking? And have we gotten any sort of update in the Middle East about how quickly this infrastructure could come back online?

So the main infrastructure damage still see Qatar is liquefaction trains, which has been well publicized by now. So Qatar has 14 liquefaction trains at the moment, two of them, two of which are damaged, which is about equivalent to about 17% of their total capacity, remaining 12 remain undamaged, and they can be restarted when conditions are right. The hour estimates have always been somewhere between two to three months to get back to full capacity for the remaining 12 trains.

And this has been actually recently confirmed earlier this week by Qatar Energy CEO, which mentioned the exact same timeline, two to three months for LNG. Not withstanding other products, which are also exported from Ras Laffan, like liquids, and fertilizers, petrochemicals, etc. Gotcha.

Thank you, Otar. And I'd say, that's an interesting transition into metals, because I think there's two elements of infrastructure and feedstock, which are quite important on the metal side, both when we look at the Middle East and the broader ripples throughout the supply chain. So, so basically, when we're thinking about a metals refinery, and or smelter, what you're doing is you're putting in a an unrefined feedstock, and going through a purification process into a much higher grade metal.

And if we look at aluminum, which we've been talking a lot about over the last few weeks, the interesting dynamic and maybe a little bit different from what we see on the gas side is that the smelters in the Middle East need to import their feedstock. So right, they're not necessarily right at the edge of these gas fields, they, they need to import alumina. And basically, you need two tons of alumina to create one ton of aluminum.

And the reason that the smelters are in the Middle East is because of the cheap power and the cheap gas, because the other key input is power. Aluminum is extremely power intensive. And so from our perspective, there's been this ticking clock, where the longer and longer we go without seeing those alumina inflows via the Strait of Hormuz, the lower and lower capacity utilization is ultimately naturally going to be.

Now, this has been added to by direct infrastructure damage to multiple smelters at the end of March. But an interesting dynamic that came out this week in some of our discussions around aluminum conference here in London, is that actually we are getting to another point again, where alumina inventory coverage, so that raw material inventory coverage at aluminum smelters in the Middle East is now getting critical. And to some degree, that is a quite an interesting dynamic, because it likely means that in the coming weeks, we're, we're going to potentially see a further ramp down of production operating rates in the Middle East, which only builds a bigger hole for the aluminum supply chain to dig out of once we do resume flows to the Strait of Hormuz and allow for a backfilling of this raw material inventory stockpiles.

You know, I think it's interesting as well to sort of contrast the aluminum with what Otar was saying on the LNG side in that, if you have a direct hit in a sudden shutdown to an aluminum smelter infrastructure, that is a much more prolonged restarting process. So we're still thinking that you essentially rebuilding these pot lines is what they're called, when they freeze, when you suddenly lose the power, can take upwards of a year's time. And so from that perspective, that's why we know there's been such intense focus on this forecasted 2 million ton deficit in aluminum, because it is acute right now, we're not getting the metal out of the Middle East.

And it is prolonged to some degree, because of the restart timelines that elongate. From our perspective, the other sort of impact on metal supply chains is really through the feedstock, right. So we've been talking a lot about sulfur, and sulfur is used in the refining process for different types of metals.

So both copper, about 20% of the world's copper supply is something called leaching, which essentially, you need sulfuric acid to leach out the copper from the ore stockpiles. And these are slower moving disruptions and not an outright damage to infrastructure, it's just about curtailing, you know, the actual production rates as we go forward. So if we kind of sum things up here, you know, infrastructure, deeply important to the supply chains across these commodities, when we're looking at the Middle East, LNG, a very complex infrastructure heavy supply chain with damage to trains in Qatar, which could take upwards of two to three months to resume.

Once we get to a point that that is feasible in aluminum, it's both about feedstock availability, and also outright infrastructure damage with a even longer pro, you know, restart timeline when we're thinking about the necessary rebuild for some of these smelters that have suddenly lost power. Otar, thanks so much for joining me to our listeners. Thank you again for tuning into the commodities edition at JPMorgan's At Any Rate podcast.

We look forward to continuing the conversation next week. This communication is provided for information purposes only. Please refer to JPMorgan research reports related to its content for more information including important disclosures. 2026 JPMorgan Chase & Company All Rights Reserve.

This episode was recorded on May 15, 2026.