Wood Mackenzie warned on Wednesday that the Iranian conflict surrounding the Strait of Hormuz is beginning to have an impact on mining companies located far from the Persian Gulf.
This natural resources consulting company pointed out in a new report that this conflict is hindering the transportation of sulfur to copper smelters in the Democratic Republic of the Congo and nickel smelters in Indonesia, while reducing the supply of aluminum in the Middle East and pushing up the prices and premiums in major metal markets.
This conflict has disrupted more than half of the maritime trade of sulfur, causing a supply disruption of approximately 11 million barrels per day of crude oil, and putting at risk about 3-3.5 million tons of aluminum production this year. Wood Mackenzie stated that the price of sulfur has risen by 245% compared to the same period last year. Since the outbreak of the conflict, the tax-inclusive aluminum premium in Europe has climbed by 73% to a record level of $621 per ton.
Tony Knutson, the global power coal market director at Wood Mackenzie, stated in a press release accompanying the report: "Integrated producers with localized or secure supply sources will remain resilient, while operations that rely on long-distance, high-risk maritime transportation of raw materials are facing ongoing supply constraints and profit fluctuations."
The supply disruption that occurred in the Middle East, which accounts for 9% of the global aluminum smelting capacity, has also completely disrupted the flow of metals far beyond the Gulf region.
Wood Mackenzie data shows that last year, Europe imported approximately 1.3 million tons of primary aluminum and alloyed aluminum from the Middle East, accounting for 21% of its total imports. Due to these supply constraints, buyers in Europe and the United States are now intensifying their competition for Canadian metals.
Canadian producers have helped fill some of the gaps in Europe. Last year, US tariffs prompted more aluminium from Quebec to be shipped across the Atlantic, reducing the province's share of exports to the US from 95% in the first quarter to 78% in the second quarter, while its share of exports to Europe rose from 0.2% to 18%. The large primary aluminium smelter Aluminerie Alouette in the Port-Joie area of Quebec shipped 57% of its output to Europe that quarter, up from 4% in the first quarter. The US-based Alcoa company transferred about 100,000 tonnes of Canadian-produced aluminium to non-US markets such as Europe.
Charvi Trivedi, the chief analyst of Wood Mackenzie, said: "The Middle East could lose up to 3.5 million tons of aluminum production by 2026. The resulting gap is too large for other regions to fill."
