UBS has released a research report indicating that recent supply risks in the Middle East have pushed up international aluminum and thermal coal prices. The bank noted that, following oil and natural gas, aluminum and thermal coal are likely to be the commodities most affected by Middle East conflicts. Thermal coal is supported by substitution effects from gas-to-coal switching, and energy price risk premiums may persist in the short term, driving coal prices higher. For aluminum, supply disruptions in the Middle East and rising energy costs are pushing up the cost curve. Approximately 650,000 tons of aluminum supply has already been disrupted. If shipping disruptions in the Strait of Hormuz persist for several weeks, around 4 million tons of smelting capacity could be shut down, increasing near-term upside risks for aluminum prices. The bank has raised its near-term price forecasts for aluminum and thermal coal to reflect supply risks and higher energy prices resulting from Middle East conflicts. UBS increased its 2026 LME aluminum price forecast by 13% to approximately $3,250 per ton, while maintaining its 2027 forecast at $3,300 per ton. In European and U.S. markets, where Middle East supply accounts for about a quarter of imports, any disruption could push up aluminum premiums in these regions. Regarding thermal coal, since the outbreak of conflict involving Iran, European natural gas prices have risen by approximately 50%, Brent crude oil prices have increased by about 30%, and thermal coal prices at Australia’s Newcastle Port (NEWC) have climbed around 15%. Elevated natural gas prices are supporting coal prices. UBS raised its 2026 NEWC thermal coal price forecast by 10%, from $115 to $126 per ton. Although large-scale gas-to-coal switching is not expected in the short term, coal demand could increase if energy prices remain high. The bank’s medium-term outlook remains unchanged, anticipating lower demand and coal prices falling back toward the cost curve, around $100 per ton. UBS noted that a prolonged Middle East conflict leading to significantly higher energy prices—potentially affecting inflation and interest rates—could pose downside risks to global economic growth, industrial production, and metal demand. However, the bank observed that many economically sensitive and cyclical end-demand drivers have already been weak for an extended period, reducing the extent of downside risks. Meanwhile, energy transition-related demand may find support under high energy price conditions.
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