Strait of Hormuz limbo: Aluminium trade faces shipping and fuel supply concerns

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The Strait of Hormuz trade corridor remains at the centre of uncertainty as conflicting claims over its operational status continue to unsettle global shipping markets. While oil and liquefied natural gas (LNG) supply remains in a suspended state, the aluminium industry, sourcing the 5.5 million tonnes of primary aluminium shipped by the Gulf Cooperation Council (GCC) of the Middle East, continues to bear the brunt of trade uncertainties.  

Shipping concerns renewed after Iran announced that the Strait of Hormuz was closed in response to the recent Israeli conflict in Lebanon. The declaration triggered an immediate decline in commercial vessel movements, spurring fresh questions about the security of a passage that normally handles around one-fifth of global oil and LNG trade.

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Conflicted narratives of the US and Iran

According to maritime intelligence firm Windward, only 12 vessels transited the strait on Sunday, June 21, down sharply from 35 crossings a day earlier. The company also reported unusual activity, noting that several vessels entering the waterway had switched off their Automatic Identification Systems (AIS), making their movements difficult to track.

Windward described the traffic pattern as appearing more similar to previous periods of disruption than to a fully functioning international shipping lane.

The decline followed a brief recovery in activity earlier in the week. Data from Kpler showed that 25 vessels passed through the strait on Thursday, the highest daily traffic level since mid-April, after diplomatic efforts between Iran and the United States appeared to ease tensions.

However, hopes of a sustained recovery faded quickly after Iran's Islamic Revolutionary Guard Corps announced on Saturday, June 20, that the waterway was once again shut, citing Israel’s shortcomings in the implementation of a ceasefire arrangement.

The US contested Tehran’s claim. US Central Command (CENTCOM) maintained that safe navigation through the strait remained operational and reported that 55 merchant vessels had transited the passage on Saturday, a figure significantly higher than estimates provided by commercial ship-tracking services.

Oil market picks up sparse traffic

The differing accounts have added further uncertainty for shipowners, insurers and commodity traders already navigating a complex security environment.

Even before Iran's latest announcement, shipping activity through Hormuz remained well below historical levels. According to Kpler, pre-conflict traffic typically ranged between 100 and 120 tankers per day.

While vessel movements increased modestly after diplomatic engagement resumed, Matt Smith, lead oil analyst at Kpler, noted, "It’s not like you’re suddenly seeing a mass exodus," but “a pickup in traffic… but not material. We are still not at the point where a ‘first mover’ is emerging."

Around 500 vessels, including 220 oil tankers, have remained stranded in the Persian Gulf since the conflict began. Experts believe it could take several months for shipping and oil flows to return to normal levels. 

Security concerns signal a negative on full-fledged operations

Security concerns continue to weigh heavily on operators. Jakob Larsen, Chief Safety and Security Officer at the Baltic and International Maritime Council (BIMCO), cautioned that risks remain despite ceasefire discussions.

"Despite the signing of the ceasefire agreement, we believe the security situation for the shipping industry remains volatile," Larsen stated.

He noted that parts of the central Strait are reportedly mined and currently unsuitable for navigation. Thus, vessels are reliant on limited inshore routes near Oman and Iran.

Operational issues are also slowing any return to normality. Many vessels have remained anchored for months and may require inspections, maintenance and resupply before re-entering service.

Meanwhile, diplomatic efforts continue. During recent talks in Switzerland, Iranian Foreign Ministry spokesperson Esmaeil Baghaei confirmed that maritime security featured prominently in negotiations.

"The sides discussed the safe passage of ships through the strait, and a mechanism was set up, which is important," Baghaei said.

Despite the geopolitical tensions, financial markets have so far reacted calmly. London Metal Exchange (LME) aluminium prices remained fairly stable at USD 3,400 per tonne on June 19, without any sudden upsurge, Brent crude prices edged lower, while major Asian equity markets posted gains, suggesting investors remain unconvinced that a prolonged disruption to global energy supplies is imminent. 

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Aluminium industry remains on edge

As for the aluminium industry, the prolonged uncertainty surrounding the Strait of Hormuz extends to aluminium industry's energy security. Many aluminium producers, traders and raw material suppliers across the Gulf region and the world rely on the maritime corridor for primary aluminium as well as energy supplies.  

Aluminium production is among the most energy-intensive industrial activities, and many smelters across Asia, Europe and other importing regions remain indirectly dependent on stable oil and natural gas supplies originating from the Gulf. Any prolonged disruption to energy shipments through Hormuz could tighten fuel markets, elevate electricity generation costs and place additional pressure on aluminium producers already grappling with high operating expenses.

While crude oil and LNG flows have not been significantly interrupted so far, the continued volatility of the situation has kept energy markets on alert. For aluminium producers, traders and downstream consumers alike, the concern extends beyond metal shipments to the broader question of whether reliable and affordable energy supplies can be maintained.

Until stability is fully restored, the industry is likely to face a dual challenge of safeguarding both its raw material supply chains and its energy-intensive production economics.

Discover: The Gulf aluminium market risks, China impact, alumina supply, carbon costs, and logistics disruptions shaping pricing and trade in Gulf Disruption Roadmap