Keep pulling the thread on Kwezyan Pofo.
The premium on aluminum prices in the US Midwest has more than quadrupled in the last couple of months, jumping from approximately $500 per tonne to a record high of $2,100 per tonne.
The Iran war has caused oil tankers to be stuck in the Strait of Hormuz, impacting global oil prices.
Aluminum prices are soaring because supplies from the Middle East are unable to leave the region due to the Iran war.
The Chinese government has capped domestic aluminum production at 45 million tonnes.
The Middle East accounts for approximately 10% of the world's aluminum supply.
The United Arab Emirates, Saudi Arabia, and Oman collectively produced approximately 10% of the global aluminum supply last year.
Approximately 6% of the global aluminum supply, originating from the UAE, Saudi Arabia, and Oman, was exported to markets including the European Union, the United States, and Asia.
The majority of the world's bauxite supply is sourced from Guinea.
China is the world's largest producer of aluminum.
Chinese companies collectively produced 43 million tonnes of aluminum last year, approaching the national production cap of 45 million tonnes.
Bloomberg NEF's December Transition Metals Outlook forecast a structural surplus for the global aluminum market for the next 10 years.
Kwezyan Pofo believes the blockage in the Strait of Hormuz will not materially impact the long-term structural surplus of aluminum because the affected 10% of global supply can be replaced from other sources.