According to an analyst team at Morgan Stanley, aluminum supply losses caused by the Middle East conflict could persist until 2026. The bank emphasized that restarting affected operations could take up to 12 months, impacting approximately 4% of global supply. Consequently, Morgan Stanley explicitly sees "upside risks for aluminum prices in 2026." As physical metal markets tighten further, regional premiums in Japan, Europe, and the United States are rising significantly compared to the London Metal Exchange benchmark price. However, the bank also noted that a global economic slowdown could weaken downstream demand, potentially limiting the extent of aluminum price increases.
The aluminum market is currently in a state of tight supply-demand balance. Latest market data shows the LME aluminum benchmark price hovering around $3,469 per ton, representing a cumulative increase of over 18% since the beginning of the year. The Middle East, being a crucial aluminum smelting hub, faces production disruptions primarily due to unstable energy supply and blocked logistics channels. If the conflict continues, the recovery cycle for affected smelters will likely exceed initial market expectations. The restart process involves not only equipment repairs but also the re-coordination of power, raw materials, and transportation resources, which Morgan Stanley identifies as the core reason for the potential 12-month recovery period.
Rapidly rising regional premiums further confirm physical shortage pressures. Japan's second-quarter aluminum premium has surged to $350-353 per ton, reaching an 11-year high and marking a sharp increase of 79%-81% from the first quarter. The European duty-paid premium remains elevated at $480-495 per ton, while the U.S. Midwest premium has also surpassed previous peaks. These premium increases reflect the additional costs downstream buyers are paying to secure stable supply, amplifying signals of regional tightness beyond the London benchmark.
However, uncertainties on the demand side cannot be overlooked. A significant slowdown in global economic growth would directly impact key aluminum-consuming sectors such as automotive, construction, packaging, and new energy. While lightweight electric vehicles and grid upgrades provide long-term structural support, short-term macroeconomic pressures could lead to order delays or inventory destocking, thereby imposing some constraints on price increases.
To clearly illustrate potential impacts under different scenarios, the following table compares baseline recovery assumptions against prolonged disruption scenarios:
The core difference between these scenarios lies in the amplified effect of disruption duration on global supply chains. Investors should closely monitor developments in the Middle East situation and the latest growth data from major economies to dynamically assess risk exposure.
The Middle East conflict has become the primary supply-side disruption factor in the current aluminum market. Morgan Stanley's analysis clearly reveals the complex interplay between supply recovery timelines, regional premium transmission, and macroeconomic demand. The ultimate price direction will depend on the evolution of the conflict, the actual pace of smelting capacity restarts, and the resilience of the global economy. Market participants are advised to maintain cautiously balanced position management strategies.
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