Iran war squeezes acid, aluminium, miners’ margins: WoodMac report

The Iran war around the Strait of Hormuz is starting to hit miners far from the Persian Gulf, Wood Mackenzie warned on Wednesday.

The conflict is choking sulphur shipments that feed Congo copper leach plants and Indonesian nickel refineries, while cutting Middle East aluminium supply and pushing up prices and premiums across major metal markets, the natural resources consultant says in a new report.

The clash has disrupted more than half the seaborne sulphur trade, shut in about 11 million barrels per day of crude and put 3 million to 3.5 million tonnes of aluminium output at risk this year. Sulphuric acid prices have jumped 245% from a year earlier, WoodMac said. Europe’s duty-paid aluminium premium has climbed 73% since the war began to a record $621 (C$858) per tonne, Reuters reported Wednesday.

“Integrated producers with localized or secure input streams will remain resilient, while operations dependent on long-distance, high-exposure maritime feedstocks face persistent supply constraints and volatile margins,” Tony Knutson, WoodMac’s global head of thermal coal markets, said in a release accompanying the report.

Spot market

Mines and refineries that buy sulphur, acid and fuel on the spot market are taking the hit first, WoodMac noted. Producers with their own smelters or locked-in supply are in far better shape and some are turning the shortage into a new revenue stream. Several Indonesian nickel processors had last month already cut battery-feed output by at least 10% as sulphur shortages bit, WoodMac said.

The country produces more than half the world’s nickel and imports roughly three quarters of its sulphur from the Middle East. At some high-pressure acid leach plants, stockpiles covered only one to two months of use, WoodMac said.

“Major producers are slowing output and stepping back from long-term contracts as shortages loom,” said Alina Zhunussova, WoodMac’s principal nickel analyst. “The sector’s rapid expansion has left it heavily exposed to this disruption.”

DRC copper

While the war’s impact on copper processing globally remains muted, the Democratic Republic of Congo’s (DRC) copperbelt faces the brunt of the acid squeeze. The DRC imported about 1.3 million to 1.4 million tonnes of sulphur last year, according to Reuters, most of it from the Middle East.

Partially fabricated steel shipments through the Gulf are down but not acutely hurting construction beyond the region, according to WoodMac.

“The loss of Iranian output and disruption to Gulf semis exports totals well below 1% of global supply, making it largely immaterial at the global level,” Charles Cooper, WoodMac’s head of copper research, said in the release.

The Shanghai Metals Market last month said sulphuric acid in the DRC has been trading at $1,000 to $1,400 per tonne, compared with normal prices below $500, a current level that threatens smaller copper leach operators that depend on bought acid rather than captive supply.

Ivanhoe Mines’ (TSX: IVN) Kamoa-Kakula complex is able to produce its own acid to stave off the war’s impact. Its smelter sold 107,700 tonnes of sulphuric acid in the first quarter at an average $467 per tonne. The company said May 6 it had signed a June contract at $725.

Kamoa-Kakula is producing about 1,350 tonnes of acid per day, or 60% of design capacity.

Aluminum gap

Disruption in the Middle East, which accounts for 9% of global aluminium smelting capacity, has also upended metal flows far beyond the Gulf.

Europe imported about 1.3 million tonnes, or 21%, of its primary and alloyed aluminium from the Middle East last year, WoodMac data shows. With those units constrained, European and U.S. buyers are now competing harder for Canadian metal.

Canadian producers have already helped fill part of Europe’s gap. U.S. tariffs pushed more Quebec aluminum across the Atlantic last year, cutting the province’s U.S. export share to 78% in the second quarter from 95% in the first, while Europe’s share rose to 18% from 0.2%.

Aluminerie Alouette, the big primary aluminum smelter in Sept-Îles, Quebec, shipped 57% of its output to Europe in the quarter, up from 4% in the first, and U.S.-based Alcoa (NYSE: AA) diverted about 100,000 tonnes from Canada to non-U.S. markets such as Europe.

“The Middle East is on track to lose up to 3.5 million tonnes of aluminium production in 2026,” WoodMac principal analyst Charvi Trivedi said. “The gap left behind is too large for the rest of the world to fill.”