Iran War Compounded by Structural Shortages: Copper and Aluminum Markets Face a "Super Squeeze"
Claire Weston
Copper is near a record close; aluminium hit a four-year high. The Iran war has virtually shut the Strait of Hormuz, compounding years of under-investment and surging demand from data centres and EVs — pushing industrial metals into what executives call a 'super squeeze' that could last years.
What does 'super squeeze' actually mean?
Demand was already strong: data centres need copper for wiring and aluminium for server racks; grid expansion and EVs are pulling from the same pool.
Supply is now being choked by the Iran war: the Strait of Hormuz is nearly closed, Middle Eastern capacity is damaged, and raw-material shipments are blocked.
This means → demand rising and supply shrinking at the same time — prices are being squeezed to extremes, and the industry sees no quick fix.
Why did the copper deficit suddenly grow tenfold?
Goldman Sachs raised its 2025 ex-US copper deficit forecast from 60,000 tonnes to 640,000 tonnes — more than a tenfold jump.
A hidden chain reaction drives the blow-out: war doubles the price of sulphur → sulphur is the feedstock for sulphuric acid → sulphuric acid is essential for copper leaching — the process that extracts copper from ore → less acid, less copper.
In plain terms = the war did not just block shipping lanes; it strangled copper production at the chemical-input level, putting a combined ~325,000 tonnes of output in the DRC and Chile at risk.
Goldman simultaneously lifted its year-end copper price target by 10% to $13,735 per tonne.
Why is aluminium hit even more directly?
The Middle East accounts for nearly 10% of global refined aluminium output. Key producers Alba and EGA cut production after Iranian strikes damaged infrastructure.
The closure of the Strait of Hormuz also blocked shipments of alumina — the core feedstock for smelting aluminium.
This means → aluminium lost supply in a single, direct blow — capacity and logistics damaged simultaneously, with no indirect transmission chain like copper's.
Why can't supply catch up over the long run?
Pan African Resources CEO Cobus Loots points to decades of under-investment: since the early 2000s, investors pushed miners to stay disciplined with capital — good for returns, but it left new-mine spending chronically short.
Valterra Platinum CEO Craig Miller adds: "Demand will keep growing, and supply growth — from any angle — has not kept pace."
This reflects a deeper problem: even if the war ended tomorrow, the structural deficit would remain — closing the investment gap takes years.
What is the biggest risk to the bull case?
Orion Resource Equities CIO James Hayter argues that "prices need to go significantly higher" to reflect structural shortfalls.
But Goldman and others flag a critical variable: if the Iran war triggers a global recession, the demand side collapses — and the price logic reverses.
In plain terms = the copper-aluminium rally rests on the assumption that demand holds; a recession is the largest tail risk — if it materialises, the squeeze turns into a stampede for the exits.
Content is for reference only, not financial advice.