Gulf aluminum shipments stuck as Strait of Hormuz blockades put a strain on supply : NPR
The U.S. blockade and conflict in the Strait of Hormuz have blocked Gulf aluminum shipments and pushed prices to their highest levels in four years, exposing global supply vulnerabilities and escalating trade tensions.
MICHEL MARTIN, HOST:
Some ships are passing through the Strait of Hormuz amid rival Iranian and U.S. blockades, but that’s only a fraction of what previously moved through the waterway. We have now talked about the impact on oil and fertilizer – and now on aluminum. Among the hundreds of stranded ships are cargo ships carrying metal from Gulf countries to Jackie Northam, NPR’s international affairs correspondent.
JACKIE NORTHAM, BYLINE: The Gulf states produce about 10% of the world’s aluminum and rely primarily on the Strait of Hormuz for its global delivery. But that has stopped since the war began in late February and Iran has effectively halted traffic across the strait, said Ross Strachan, head of aluminum raw materials at CRU, which specializes in the metals industry.
ROSS STRACHAN: This is causing enormous uncertainty and significantly higher prices because it is a major choke point for supply.
NORTHAM: The price of aluminum hit a four-year high last week due to Iranian and US blockades of the Strait of Hormuz. The shortage of Gulf aluminum is felt in most regions of the world, particularly in Asia but also in the United States, explains Austin Keating of SNIPS, a specialist publication.
AUSTIN KEATING: It’s a big supplier of raw aluminum – you know, 20%, a fifth of the capacity we need to produce here. So that had a huge impact.
NORTHAM: But aluminum had already encountered difficulties in the United States before the war in Iran. In an effort to boost domestic production, President Trump imposed 50% tariffs on all aluminum imports. That includes Canada, by far the largest supplier of primary aluminum to the United States, says Scott Lincicome, an economics and trade specialist at the Cato Institute.
SCOTT LINCICOME: The president’s tariffs caused Canadian aluminum suppliers to look elsewhere, and they began shipping more to Europe and less to the United States.
NORTHAM: Lincicome says the United States doesn’t produce enough aluminum to meet domestic demand. So, he said, American producers looked abroad.
LINCICOME: They found aluminum suppliers in the Middle East, mainly in Bahrain and the United Arab Emirates, and began buying more from them and entering into contracts for increased supply to the Middle East. And then boom: a lot of that supply just can’t get out of the Gulf region.
NORTHAM: CRU’s Strachan says tariffs and supply shortages mean the price of aluminum used in making cans, cars and many other products has skyrocketed. He says Gulf smelters are trying to redirect aluminum overland to other ports outside the Strait of Hormuz.
STRACHAN: Logistically, it’s much more difficult, much more expensive and much longer. And of course, this is happening at the same time that many other industries are doing this as well, and so these ports are also becoming very busy.
NORTHAM: The Trump administration recently recalibrated tariffs on some products made from aluminum, but not on raw metal like that coming from the Gulf. It remains at 50%. Lincicome says it would help U.S. manufacturers and consumers if Trump lifted tariffs on aluminum until the Iran conflict ends.
LINCICOME: A temporary suspension would make all the sense in the world. Allowing U.S. manufacturers to bring in the supplies they need at a much lower price, thereby increasing their production and inventories, and then restocking them once the conflict ends.
NORTHAM: It’s not clear whether a supplier like Canada would want to come back knowing that it would only be temporary.
Jackie Northam, NPR News.
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