The recent situation in the Middle East has continued to be tense, especially the blockage of shipping in the Strait of Hormuz, which has had a broad and significant impact on the global manufacturing industry. Global energy and industrial raw material transportation is choked, causing soaring energy prices, disruptions in the supply of critical raw materials, and global logistics disruptions, which in turn drive up manufacturing costs and threaten production in multiple industries, from automotive to semiconductors.
The "industrial skeleton" is choked
Aluminum is an important metal in the global industrial "basket" and one of the most affected non-oil commodities in the Middle East war. The Middle East is an important supplier of aluminum, accounting for about 8% to 9% of the world's total production. Aluminum supply disruptions could lead to tighter supply chains in advanced manufacturing, driving up production costs in automotive, aerospace, and construction manufacturing.
Since the end of last month, aluminium prices on the London Metal Exchange have risen more than 9%, reaching their highest level since 2022.
Thomas Strobel, a strategist at Italy's UniCredit Bank, said that since smelters usually only stock up on three to four weeks of alumina inventory, prolonged shipping disruptions will force factories to cut production, leading to tight supply in the global market.
Bahrain Aluminium operates the world's largest monocole aluminum smelter. Due to the almost complete disruption of shipping in the Strait of Hormuz, the company began to phase out production and began to close three production lines, which together account for 19% of its total annual production capacity of 1.6 million tons.
Bahrain Aluminum's production cuts are the latest example of the impact of the situation in the Middle East on global supply chains. Citibank analysts raised their three-month aluminum price forecast to $3,600 per ton from the previous $3,400 and predicted that aluminum prices could climb to $4,000 per ton if the supply situation deteriorates.
Industry insiders pointed out that even if shipping in the Strait of Hormuz resumes, aluminum circulation may take longer to return to normal. Because aluminum is often transported in containers rather than tankers, it takes a long time to rebalance and adjust the container network.
Chipmakers face the risk of "gas outage"
The situation in the Middle East has exposed another weakness in the global high-end manufacturing supply chain: major chipmakers are at risk of helium shortages.
Helium is a by-product of natural gas processing and is indispensable in the cooling of chip manufacturing. Qatar accounts for about one-third of the world's helium production. However, Qatar Energy previously announced that it had stopped producing liquefied natural gas, aluminum and some chemicals due to the attack on key facilities.
Anish Kapadia, CEO of market research firm Acap Energy, said that helium spot prices have doubled since the situation in Iran escalated. Unlike oil or gas, helium is difficult to store and has very limited reserves. The pressure on the helium market will not ease in the coming months due to damage to Qatar's gas production facilities.
Kim Young-bae, a member of South Korea's ruling Democratic Party of Korea, recently warned that the situation in the Middle East could disrupt the supply of helium and other raw materials from companies such as SK hynix and Samsung Electronics, whose storage components are extremely important to artificial intelligence chip manufacturers. According to data from the General Administration of Customs of South Korea, about 65% of South Korea's helium was imported from Qatar last year.
Semiconductor component costs have continued to rise over the past year, and new supply chain risks will exacerbate this pressure. According to an article published on the website of the American "Politico", semiconductor manufacturing interruptions or soaring prices may impact the global market, affecting computers, smartphones, automobiles, medical equipment and other fields.
The "blood supply" of the manufacturing industry is threatened
The disruption of shipping in the Strait of Hormuz has also affected the production and transportation of a variety of petrochemicals, with soaring sulfur and naphtha prices, highlighting that the situation in the Middle East has spilled over to the broader supply chain.
Sulfur is essential for industries such as fertilizers, computer chips, metalworking, and more. The Gulf region accounts for about 45% of the world's sulfur exports, and the recent surge in sulfur prices has exposed the fragility of the supply chain built around the Gulf region, according to CRU Group, a metals and mining intelligence company.
Clive Murray, CEO of London Commodity Brokerage Ltd., said that while some refineries outside the Middle East have sulfur for sale, the problem is that ships cannot be found to transport sulfur because ship operators are unsure whether they can obtain transportation fuel.
American mining tycoon Robert Friedland posted on social platforms that sulfur supply disruptions will affect copper production in Africa, and the cost of leaching copper oxide ore from the central African copper belt will become more expensive.
The delay in the war in the Middle East has led to a tightening of the supply of naphtha, a key raw material for plastics, and many petrochemical companies in Japan have reduced production, and South Korea has announced that it will restrict naphtha exports. The supply of polyethylene, a downstream product of naphtha, known as the "skin" of modern manufacturing, is also at stake.
Usha Haley, a professor at Wichita State University in the United States, said that the shortage of polyethylene will push up the price of consumer goods. "We are about to enter a period of increased inflation and shrinking manufacturing."