Middle Eastern aluminum plant cuts production, triggering supply chain disruptions. Alcoa(AA.US benefits from the "fisherman’s advantage" as orders surge.

The U.S.’s largest aluminum producer, Alcoa Corp. (AA.US), said that as Middle East smelters cut production, many buyers have turned to alternative sources for supply, and the company has received a large number of purchase inquiries.

On Tuesday, Molly Beerman, the company’s chief financial officer, said at a J.P. Morgan conference: “We do see customer order volumes increasing, and inquiries for the second quarter and the second half of the year are also increasing. These customers’ aluminum supply was originally, in part or even in most cases, coming from Middle East smelters. So right now, we are indeed receiving additional spot orders, which will be beneficial for the company in the second half of this year.”

Against the backdrop of the Strait of Hormuz’s shipping traffic being effectively disrupted, aluminum buyers are actively looking for alternative sources of supply. Aluminum output in the Gulf states accounts for about 9% of global production. To save on raw materials, local smelters have reduced output over the past week and through the weekend.

Beerman revealed that Alcoa, also a major producer of alumina, ships about 4 million metric tons of this raw material from the Middle East each year to supply its smelters. And after the closure of the Strait of Hormuz, “this shipment of raw material that was originally destined for the Middle East is now turning to other markets and will very likely flow to China.”

Earlier, due to U.S. and Israel attacks on Iran, aluminum prices surged last week to a new high since 2022, before easing somewhat afterward. The U.S. Midwest premium—an additional premium over the benchmark price when delivering aluminum to the region—rose last week to $1.10 per pound, setting a record high.