"The concern now is what the numbers do not yet fully show: inventories depleting, cost pressures building slowly, investment decisions deferred, and demand reorienting away from China," Wood Mackenzie noted . The aluminium market was already trending toward a structural deficit before the conflict, driven by Chinese capacity caps (reaching 45 Mt in 2025) and surging demand from EVs, solar panels, and AI data centres .

The Sulphur Crisis: A Concealed Supply Shock

The single most underappreciated force pressuring metals markets in 2026 is a generational disruption in sulphur supply.

The closure of the Strait of Hormuz on February 28 effectively immobilised Gulf sulphur output, a by-product of oil and gas that supplies roughly half of the world's sulphur . Prices have soared to unprecedented levels—CIF Indonesia sulphur hit $1,100–$1,300/mt by mid-May from roughly $500/t before the conflict .

Three simultaneous shocks have converged to produce the most acute sulphur supply disruption in a generation: the Hormuz closure, China's sulphuric acid export ban, and a Russian sulphur export ban . This has direct and serious consequences for metals producers:

• Indonesian nickel producers, which rely on sulphur for high-pressure acid leaching (HPAL), face squeezed margins in an already oversupplied nickel market . Some HPAL plants hold only one to two months of sulphur inventory .
• Copper plants are seeing tighter sulphuric acid availability, raising processing costs globally .
• The sulphur market was already in a pronounced deficit of about 1.9 million tonnes per year in 2025, before the war .

"What begins as an operational disruption in the Middle East is becoming a structural cost and supply chain challenge for global metals and mining markets," said Tony Knutson of Wood Mackenzie .

Copper Supply Outlook: A Fragmented Picture

Copper forecasts in 2026 are unusually divergent, signalling a market in fragile balance where small changes in assumptions produce sharply different outcomes.

• ICSG (May 2026): Revised its 2026 balance from a 150,000-tonne deficit to a 96,000-tonne surplus, reflecting demand softness .
• Morgan Stanley: Forecasts a much larger 600,000-tonne refined copper deficit for 2026, the largest in more than 20 years, driven by mine disruptions, US tariff risk, and sulphuric acid shortages .
• Fastmarkets: Expects a 170,000-tonne surplus, citing stronger supply and slower demand .
• J.P. Morgan: Projects a 330,000-tonne deficit, driven heavily by AI data centre demand .
• Bloomberg analyst consensus for copper in 2026 is roughly $13,007/tonne, with Macquarie at $13,165 and Goldman Sachs at $12,650 .

The wide forecast range—from a surplus of ~170,000 tonnes to a deficit of 600,000 tonnes—underscores how sensitive the market is to demand assumptions, mine disruptions, and sulphur-related production costs . The truth is that institutional forecasters disagree significantly on the magnitude of the deficit, which itself is important information for investors .

Major Policy Milestones Shaping Metals Markets

U.S. Mid-Term Elections (November 3, 2026). All 435 House seats and 35 Senate seats are up for election . Morgan Stanley expects the outcome to have only a "limited" direct stock market impact, but the balance of power in Congress will shape tariff policy, trade agreements, and energy/industrial legislation that directly affect metals demand and supply chains . The election could either extend or constrain Trump-era tariffs that have buffeted commodities .

Federal Reserve Rate Decisions. New Fed Chair Kevin Warsh has taken a notably hawkish stance, sparking speculation about rate hikes rather than cuts . Base metals rallied after the Fed's July 2026 pause—copper, aluminium, and zinc all rose as easing demand concerns lifted sentiment . However, markets remain cautious: higher borrowing costs typically dampen industrial demand and strengthen the dollar, pressuring commodity prices . The inflation feedback loop from the Iran conflict (energy costs, supply disruption) complicates the Fed's path. The June FOMC minutes revealed a deeply divided committee, split 9-to-8 on the prospect of rate hikes in 2026 .

Other Key Policy Factors:

• US Section 232 tariff risk on copper imports is tightening supply expectations .
• Tax cut extension expectations (legacy Trump-era policies) could boost consumer spending but also widen deficits, affecting dollar and rate expectations .
• Lingering effects of the 2025 tariff whirlwind from the Trump administration continue to reshape supply chains .

The Bottom Line

Wood Mackenzie's revised 900,000-tonne aluminium deficit is better than the worst-case scenario, but it is still a deficit. The sulphur crisis adds a structural cost layer that will persist as long as the Hormuz closure and export bans remain in place. Copper's fragmented forecast range—from a deep deficit to a modest surplus—is a warning that the market is balanced on a knife's edge. Add in the unknown variables of the US midterms and a hawkish Fed, and 2026 looks like a year of persistent price volatility, not stability. Investors and supply chain managers should watch sulphur inventories as closely as they watch LME warehouse stocks.

"The concern now is what the numbers do not yet fully show: inventories depleting, cost pressures building slowly, investment decisions deferred, and demand reorienting away from China," Wood Mackenzie noted . The aluminium market was already trending toward a structural deficit before the conflict, driven by Chinese capacity caps (reaching 45 Mt in 2025) and surging demand from EVs, solar panels, and AI data centres .

The Sulphur Crisis: A Concealed Supply Shock

The single most underappreciated force pressuring metals markets in 2026 is a generational disruption in sulphur supply.

The closure of the Strait of Hormuz on February 28 effectively immobilised Gulf sulphur output, a by-product of oil and gas that supplies roughly half of the world's sulphur . Prices have soared to unprecedented levels—CIF Indonesia sulphur hit $1,100–$1,300/mt by mid-May from roughly $500/t before the conflict .

Three simultaneous shocks have converged to produce the most acute sulphur supply disruption in a generation: the Hormuz closure, China's sulphuric acid export ban, and a Russian sulphur export ban . This has direct and serious consequences for metals producers:

• Indonesian nickel producers, which rely on sulphur for high-pressure acid leaching (HPAL), face squeezed margins in an already oversupplied nickel market . Some HPAL plants hold only one to two months of sulphur inventory .
• Copper plants are seeing tighter sulphuric acid availability, raising processing costs globally .
• The sulphur market was already in a pronounced deficit of about 1.9 million tonnes per year in 2025, before the war .

"What begins as an operational disruption in the Middle East is becoming a structural cost and supply chain challenge for global metals and mining markets," said Tony Knutson of Wood Mackenzie .

Copper Supply Outlook: A Fragmented Picture

Copper forecasts in 2026 are unusually divergent, signalling a market in fragile balance where small changes in assumptions produce sharply different outcomes.

• ICSG (May 2026): Revised its 2026 balance from a 150,000-tonne deficit to a 96,000-tonne surplus, reflecting demand softness .
• Morgan Stanley: Forecasts a much larger 600,000-tonne refined copper deficit for 2026, the largest in more than 20 years, driven by mine disruptions, US tariff risk, and sulphuric acid shortages .
• Fastmarkets: Expects a 170,000-tonne surplus, citing stronger supply and slower demand .
• J.P. Morgan: Projects a 330,000-tonne deficit, driven heavily by AI data centre demand .
• Bloomberg analyst consensus for copper in 2026 is roughly $13,007/tonne, with Macquarie at $13,165 and Goldman Sachs at $12,650 .

The wide forecast range—from a surplus of ~170,000 tonnes to a deficit of 600,000 tonnes—underscores how sensitive the market is to demand assumptions, mine disruptions, and sulphur-related production costs . The truth is that institutional forecasters disagree significantly on the magnitude of the deficit, which itself is important information for investors .

Major Policy Milestones Shaping Metals Markets

U.S. Mid-Term Elections (November 3, 2026). All 435 House seats and 35 Senate seats are up for election . Morgan Stanley expects the outcome to have only a "limited" direct stock market impact, but the balance of power in Congress will shape tariff policy, trade agreements, and energy/industrial legislation that directly affect metals demand and supply chains . The election could either extend or constrain Trump-era tariffs that have buffeted commodities .

Federal Reserve Rate Decisions. New Fed Chair Kevin Warsh has taken a notably hawkish stance, sparking speculation about rate hikes rather than cuts . Base metals rallied after the Fed's July 2026 pause—copper, aluminium, and zinc all rose as easing demand concerns lifted sentiment . However, markets remain cautious: higher borrowing costs typically dampen industrial demand and strengthen the dollar, pressuring commodity prices . The inflation feedback loop from the Iran conflict (energy costs, supply disruption) complicates the Fed's path. The June FOMC minutes revealed a deeply divided committee, split 9-to-8 on the prospect of rate hikes in 2026 .

Other Key Policy Factors:

• US Section 232 tariff risk on copper imports is tightening supply expectations .
• Tax cut extension expectations (legacy Trump-era policies) could boost consumer spending but also widen deficits, affecting dollar and rate expectations .
• Lingering effects of the 2025 tariff whirlwind from the Trump administration continue to reshape supply chains .

The Bottom Line

Wood Mackenzie's revised 900,000-tonne aluminium deficit is better than the worst-case scenario, but it is still a deficit. The sulphur crisis adds a structural cost layer that will persist as long as the Hormuz closure and export bans remain in place. Copper's fragmented forecast range—from a deep deficit to a modest surplus—is a warning that the market is balanced on a knife's edge. Add in the unknown variables of the US midterms and a hawkish Fed, and 2026 looks like a year of persistent price volatility, not stability. Investors and supply chain managers should watch sulphur inventories as closely as they watch LME warehouse stocks.