The conflict in the Middle East has severed the global aluminum supply chain, and global aluminum inventories are as thin as paper—only 9 days left.
According to news from the Chase Trading Desk, on April 13, JP Morgan's commodity research team released an in-depth report on the aluminum market titled &#34;Into the Void,&#34; pointing out that the global aluminum market is facing the most severe supply crisis in over twenty years due to the heavy impact of the Middle East conflict.
The current visible global aluminum inventory (exchange inventory plus social inventory) is approximately 1.9 million tons, equivalent to only 9 days of demand.
How tight is this figure? For comparison: at the beginning of 2021, global inventories covered about 20 days of demand, with some regions outside of Asia reaching as high as about 40 days. The current buffer space is less than half of what it was back then.
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/Ohbh2jyuK_WUU6HLzIsaCjC4Y9INav2bkoSfeZTmY56HgAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/Ohbh2jyuK_WUU6HLzIsaCjC4Y9INav2bkoSfeZTmY56HgAA/641"/>
<h2>Supply &#34;Event Horizon&#34;: Middle East Loss of 2.4 Million Tons</h2>
JP Morgan uses the black hole &#34;event horizon&#34; to metaphorically describe the current situation—once this critical point is crossed, regardless of how the subsequent situation evolves, the supply loss will be irreversible.
The report believes that as information about the losses from the attacks on the Al Taweelah smelter in Abu Dhabi and the Alba smelter in Bahrain continues to be disclosed, the aluminum market &#34;has likely crossed this critical point.&#34;
Specifically:
<ul>
<li>The Al Taweelah smelter (under EGA, with an annual capacity of 1.5 million tons) has confirmed its shutdown, with a repair period lasting up to 12 months, which alone will reduce supply by over 1 million tons in 2026.</li>
<li>The Alba smelter (Bahrain) currently estimates that only production lines 4 and 5 are shut down (in addition to the previously shut down lines 1-3), with only line 6 remaining operational, operating at about 30% capacity, consistent with Wood Mackenzie's preliminary assumptions.</li>
<li>The production loss in Iran is yet to be further assessed.</li>
</ul>
Overall, JP Morgan expects aluminum production in the Middle East to decline by 36% year-on-year in 2026, with a loss of about 2.4 million tons; in 2027, production will still be about 950,000 tons less than the pre-conflict forecast.
The net reduction in global supply will be nearly 2 million tons, marking the first year-on-year contraction in global aluminum production since 2019.
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OY-czfOfnb5gwQDmEzIC0z8lJrDNEkUpX2Z6qGd4dr8RcAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OY-czfOfnb5gwQDmEzIC0z8lJrDNEkUpX2Z6qGd4dr8RcAA/641"/>
<h2>Other Regions Struggle to Fill the Gap</h2>
Can the gap be filled from elsewhere? JP Morgan's answer is: very difficult, at least not within 2026.
China: JP Morgan has raised its supply forecast for China from 2026 to 2028 by about 300,000 to 400,000 tons per year, citing that high prices and better profit margins will drive capacity utilization towards the upper limit of 450,000 tons per year
However, the report clearly points out that the probability of China raising its production capacity limit is &#34;relatively low&#34;—this limit has been part of China's long-term policy framework since 2017 and is a result of &#34;anti-involution&#34; policies. Even if the policy loosens, the actual production response will take months or even quarters, providing limited help for 2026.
Indonesia: JP Morgan slightly raised its supply forecast for Indonesia in 2026 (due to the accelerated production of the Kaltara project), expecting an annual production increase of about 1 million tons in 2026, with a year-on-year increase of about 1.4 million tons in 4Q26 compared to 4Q25. However, larger increments are expected to materialize only in 2027 and beyond.
Europe: Due to high energy prices (most smelters closed after the energy price shock in 2022), there is almost no room for resumption of production. The Mozal smelter in Mozambique (with an annual capacity of 580,000 tons) is a potential candidate for resumption, but it also faces a long ramp-up period and power supply issues.
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OJwW9c4rf8hqq0X_aVoTnabTxxPR1V9qbqhmPraQSYmwAAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OJwW9c4rf8hqq0X_aVoTnabTxxPR1V9qbqhmPraQSYmwAAA/641"/>
With a sharp decline in supply, the demand side is also being reshuffled. JP Morgan has lowered its global primary aluminum demand growth forecast for 2026 from over 1.7% to 1.4%.
<h2>Price Path: Asymmetric Upside, Target $4,000</h2>
JP Morgan's core judgment is that the upward path of aluminum prices has formed an asymmetric structure—regardless of how the situation evolves, prices tend to rise.
<ul>
<li>If the situation escalates again: Blockages in the Strait of Hormuz worsen, losses in smelting infrastructure further expand, and the range of production cuts driven by alumina supply widens, leading to deeper supply shocks.</li>
<li>If the situation clearly de-escalates: Macroeconomic tail risks diminish, demand expectations improve, but supply losses have become a foregone conclusion, and aluminum prices may actually be stronger.</li>
</ul>
Currently, LME aluminum prices are struggling to sustain a breakthrough above $3,500 per ton, partly because the long positions of commodity investors are already quite crowded. However, JP Morgan believes that as the supply gap becomes increasingly evident in the physical market, prices will accelerate upward.
JP Morgan expects aluminum prices to break through $4,000 per ton in the coming months, with a second-quarter average price forecast of $3,800 per ton and an annual average price of about $3,500 per ton.
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OcWZZsHyIj2llpJ5bRCPgyRNKlwvb3MeTu6jd4WJNwHcwAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OcWZZsHyIj2llpJ5bRCPgyRNKlwvb3MeTu6jd4WJNwHcwAA/641"/>
The report also points out that if the long-term blockade of the Strait of Hormuz leads to a severe macroeconomic recession, the impact on the demand side may far exceed current forecasts, and aluminum prices may experience a larger decline within the year

516650

159163

159157

159690

The Middle East conflict has disrupted the global aluminum supply chain, with global aluminum inventory remaining at only 9 days, the lowest level in 20 years. A JP Morgan report pointed out that aluminum smelters in Abu Dhabi and Bahrain were attacked, and it is expected that aluminum production in the Middle East will decline by 36% year-on-year by 2026, resulting in a loss of about 2.4 million tons, marking the first year-on-year contraction in global aluminum production. Other regions will find it difficult to fill this gap in the short term

Global aluminum inventory is only: 9 days!