Aluminum Supply Crisis Is About To Get Worse

Aluminum prices in London are up nearly 17% since the onset of the U.S.-Iran conflict, as a growing chorus of top commodity desks, including Mercuria, Goldman, JPMorgan, and others, warn that the market is facing a major supply shock.

That disruption, driven firstly by Middle East smelter outages and the Hormuz maritime chokepoint, is now colliding with new concerns that China may be forced to curtail output amid energy-use and emissions inspections, according to Bloomberg.

More color from the report:

Chinese authorities are now moving to rein in that over- production as inventories swell. A smelter in Baise, Guangxi province, has already cut output of molten aluminum, Mysteel wrote, without providing estimates of volumes affected. The steel and oil refining industries will also be targeted, the Ministry of Industry and Information Technology said in a statement on May 13.

Building on production cut risks in China, as it is the world's biggest producer, there is another report from Bloomberg that Guinea, the world's largest bauxite producer, is preparing to limit exports of the ore, threatening flows to China's aluminum industry.

Mines and Geology Minister Bouna Sylla told the outlet that the West African nation will dial back bauxite exports in June after a surge in exports sparked a price slump that the government wants to correct.

"Supply mustn't exceed demand," Sylla said. "We want to regulate the quantity to raise prices back to reasonable levels."

For context, most of Guinea's bauxite is loaded on bulk carriers and shipped to China, where it's first refined into alumina, then turned into the industrial metal aluminum.

The complexity of the aluminum supply shock extends well beyond Gulf disruptions, as we outline in this note, which is why prices in London are trading around $3,673 a ton, the highest since March 2022.

JPMorgan analysts recently warned that the industry is descending into a black hole, or a "metaphorical point of no return," where the "global aluminum market will face a serious and prolonged supply outage," even if vessel flows through the Hormuz chokepoint resume in the near term.

Additional market warnings:

Mercuria, Goldman, JPMorgan See Major Aluminum Market Shock

The great aluminum squeeze is underway. Prices are likely going higher.

Tyler Durden Wed, 05/27/2026 - 04:15