Middle East Aluminum Capacity Ramp Up Likely to Slow — Market Talk

What happened

Aluminum prices have fallen about 17% since early June, partly because more metal is coming from restarted Middle Eastern smelters, Jefferies says. Alcoa told the bank that further restarts of paused Middle Eastern capacity will be more gradual due to tough smelter economics.

Confirmed

Global impact / market context

Slower restarts mean less new aluminum supply reaching buyers, which could support prices after the recent 17% drop. Higher alumina import costs, which means the raw material smelters need, pressure smelter profit per sale and may discourage companies from spending on restarts.

Analyst inference

Aluminum prices fell as extra Middle Eastern supply returned. If that supply growth slows, the downward price pressure could ease, helping producers like Alcoa protect revenue. Investors focused on metals should watch whether announced capacity growth is delayed, reducing future supply.

Analyst inference

What to watch

1. Alcoa said further restarts of curtailed Middle Eastern capacity will be more gradual, according to Jefferies, which met Alcoa senior management Monday. Confirmed
2. Alcoa management expects much of the Middle Eastern capacity growth planned before the war will now be more challenging to bring to market, the bank says. Proposed
3. Watch alumina import costs, which are a key smelter expense; if they stay high, restarts and capital spending on new capacity could be delayed, limiting future aluminum supply. Analyst inference

Evidence

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