The Galaxy Globe bulk carrier sits anchored in Muscat, Oman, Monday, after Iran vowed to close the Strait of Hormuz amid the U.S.-Israeli conflict with Iran. Reuters-Yonhap
The protracted war in the Middle East is causing supply disruptions and pushing up prices of critical raw materials such as aluminum and helium, weighing on Korean manufacturers of electronic home appliances and semiconductors.
According to the London Metal Exchange, aluminum was traded at $3,406.50 per ton in cash settlement as of Monday, up about 8 percent from $3,157.50 on Feb. 27, a day before the United States and Israel launched strikes on Iran.
The price hike came amid growing concerns over supply disruptions following Iran’s repeated threats to close the Strait of Hormuz after the U.S.-Israel airstrikes. The strait is a key shipping route for oil and other major commodities, including aluminum.
Aluminum produced in the Middle East accounts for about 9 percent of global production, but the share rises to around 22 percent when China, which accounts for nearly 60 percent of the global output, is excluded. Because most of the region’s aluminum is exported, and a large portion is shipped to Europe and the U.S., disruptions there can have a significant impact on global supply and prices.
ING Think, the research and analysis arm of ING Group, said in its March 6 report that major aluminum producers in the Gulf region are particularly exposed due to disruptions in the Strait of Hormuz, and escalating conflicts there could push aluminum above $4,000 per ton.
This could increase cost pressure on Korean companies such as Samsung Electronics and LG Electronics, which produce washing machines and refrigerators.
When manufacturing such appliances, aluminum is used in components such as motor housings and heat exchangers. While the share of those components in overall material costs is not large, a prolonged rise in prices could affect manufacturing costs and margins.
“In the wake of the Iran crisis, supply disruptions from the Middle East, which accounts for more than 9 percent of global aluminum production, are expected to widen the aluminum supply shortage,” LS Securities analyst Hong Sung-ki said.
“If the closure of the Strait of Hormuz continues, supply disruptions in the aluminum market will likely intensify, leading to a sharp rise in prices. Similar to the Ukraine war, the aluminum supply chain could become a hidden trigger for greater economic impact.”
Source: Korea Times News
