$AA

After Iran attacked two aluminum production facilities in the Middle East over the weekend, the threat of deepening global supply disruptions emerged, and prices on the London Metal Exchange jumped to their highest levels in nearly four years. Emirates Global Aluminium, the Middle East’s largest aluminum producer, said there was “significant damage” at its Al Taweelah facility in Abu Dhabi. Aluminium Bahrain said it was assessing the damage at its own plant. The Middle East is home to 7M metric tons of aluminum smelting capacity, which equals about 9% of global capacity. About 9% of global aluminum supply comes from the Persian Gulf, and after Iran effectively shut down the Strait of Hormuz, most companies in the region were unable to export metal outside the area. That forced customers to use their inventories and left very little buffer in the market to absorb possible supply shocks. In a note, Natixis analyst Bernard Dahdah said production at Al-Taweelah could effectively be considered “gone” for an extended period, which could shift the market from a 200K ton surplus next year to a 1.3M ton deficit. Christopher LaFemina said, “Given the clear difficulties in transporting alumina through the Strait of Hormuz, additional supply shocks in aluminum could lead to sudden price spikes,” and noted that among the companies he covers, Alcoa would be the biggest beneficiary.
For these reasons, it gapped up sharply