Following the release of its mid-year review, global energy consultancy Wood Mackenzie (WoodMac) has highlighted how contained the damage has been in the global mining and metals markets amid conflict in the Middle East and the upcoming US mid-term elections in November.

The consultancy says the clearest evidence of this is in the global aluminium sector, given that, at the height of the Middle Eastern conflict, the disruption was expected to result in a supply deficit of between two-million and three-million tonnes.

However, WoodMac notes that the revised expectation is about 900 000 t and about 32% of global direct reduced iron production, though this remains a small share of overall global steel output.

Further, the consultancy says that, while the conflict in the Middle East has disrupted half of the world’s sulphur supply and China’s restrictions on sulphuric acid shipments have compounded pressure on copper and nickel production, copper is still expected to be in surplus this year, with trade imbalances driven by tariff-related US inflows continuing to support higher prices.

Moreover, despite a decline in global steel demand, Woodmac says lithium has progressed through the disruption largely unscathed, backed by oversupply and offtake concentrated in China.

"The sector has so far absorbed a significant shock with more composure than most expected.

"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.

“A 900 000 t aluminium deficit and slight copper surplus are hardly comfortable figures. They are just not as uncomfortable as they might have been," WoodMac global markets research director Peter Schmitz cautions.

The consultancy also notes that the Middle East conflict has also sharpened a domestic resilience debate already under way, adding that, as oil and gas shipments faltered, discussions around electrification reached, in the report's words, "fever pitch," shifting from reshoring jobs through trade barriers, including the updated EU Carbon Border Adjustment Mechanism, to building regional capability against geopolitical volatility.

Whether that momentum survives a potential recession remains an open question, the consultancy concludes.