Column: Gulf aluminum disruption ripples up to alumina market
(The opinions expressed here are those of Andy Home, a columnist for Reuters.)
The Iran war has focused the aluminum market on what is not coming out of the Strait of Hormuz. But there is an equally significant problem: what is not going in.
Gulf aluminum smelters are highly dependent on imports of alumina, the intermediate product between bauxite and metal, to maintain operations.
The region has six smelters but only two alumina refineries. One of them, Emirates Global Aluminium’s (EGA) Al Taweelah plant, has been damaged by Iranian missiles. The smelter at the site is out of action for the same reason and other smelters are running at reduced capacity.
The first-round impact of this disruption is further price pressure on an already soggy alumina market as shipments are redirected away from the Gulf.
The second-round effect could be further cuts in Gulf metal production as smelters run low on raw-material stocks.
The only winner here is China, which is soaking up the displaced alumina.
Under pressure
The alumina market was under pressure even before the outbreak of the Iran war.
The London Metal Exchange (LME) price , which settles against S&P Global Platts’ assessment of the Australian fob price, has been hovering around the $300 per metric ton level since the start of the year.
That is a far cry from the frenzied rally of 2024, when prices surged to above $800 on a series of supply hits.
The market has since shifted to oversupply, thanks to continued expansion of production capacity in China and Indonesia.
Macquarie Bank assessed the global surplus at 2.54 million tons last year and in December was forecasting another surplus of 1.26 million tons in 2026.
The bank has just upped its 2026 oversupply estimate to 2.2 million tons as Gulf-bound shipments are redirected into the seaborne market.
How long the Strait remains closed to shipping will determine everything.
Input risks
The longer it takes the Strait to reopen, the greater the risk of further smelter cuts to those already announced by Qatar producer Qatalum, and Aluminium Bahrain.
The only fully integrated Gulf producer is Saudi Arabia’s Ma’aden, which operates its own bauxite mine feeding the Ras Al Khair alumina refinery.
Ma’aden produces more alumina than its smelter consumes and has been arranging emergency supplies to others, according to consultancy Wood Mackenzie.
Alumina is not the only headache for Gulf operators.
Coal tar pitch, which is used to manufacture the carbon anodes used in the smelting process, could be an even bigger logistical problem, according to AZ Global Consulting.
While other carbon inputs such as calcined coke and petroleum coke can be “diverted, stockpiled, re-bagged, trucked, or re-routed with relative flexibility … liquid pitch requires heated storage, heated silos, and heated trucks to keep it molten from loading point to discharge point,” it said.
Such facilities are not widely available and not easily improvised. “Pitch may prove to be the hardest logistics problem in the carbon chain if disruption continues,” AZ Global said.
China wins
China is the prime beneficiary of the disruption in the alumina segment of the processing chain.
It imported 338,315 tons of alumina in March, the largest monthly tally since January 2024, according to the World Bureau of Metal Statistics, which collects data from official customs figures.
AZ Global expects imports to remain robust in the months ahead on the back of an open import arbitrage between domestic and international prices.
With the Gulf crisis also sending aluminum prices to four-year highs, China’s smelters are enjoying strong margins.
Western production fell by an annualized 312,000 tons in March due to curtailments in the Gulf, while Chinese production rose by 88,000 tons, according to the International Aluminium Institute.
China’s share of global production inched up to a record 60.2% last month, and that ratio is likely to carry on creeping higher as the Iran war takes a growing toll on Gulf smelters.
(Editing by Marguerita Choy)
US aluminum industry showing resilience in face of war’s disruption, association says
The US aluminum industry is facing real challenges due to the war in the Middle East, trade tariffs and high prices, but is showing resilience and ability to adapt, officials from the Aluminum Association said on Thursday.
“We are hearing from our members that their supply chains are adjusting in real time,” Chuck Johnson, president of the association that represents US aluminum production and jobs, said on a call with reporters. The impact on supply chains could be “more profound” as the conflict drags on, he added.
The Gulf accounted for around 22% of US primary and alloyed aluminum imports in 2025, but two of the region’s smelters have been targeted by Iran and others have been unable to ship metal via their usual channels due to the closure of the Strait of Hormuz.
“There is metal coming in from other smelters and other countries,” said Kelly Thomas, the association’s vice chair, without providing specifics. “The good news is that it is a global industry and there is material available. It’s just a matter of getting it to the United States.”
Domestic aluminum recycling capacity that the US has invested in is starting to come online, which will be able to replace some imported metal, said Duncan Pitchford, president of Norsk Hydro’s US unit.
US aluminum demand in 2025 was flat on 2024, according to the association’s preliminary numbers, Johnson said. “We … presume that there may be some demand destruction from direct tariff effects, but also from the uncertainty in the market. But we have not confirmed that to date,” he added.
The Trump administration last year imposed a 50% tariff on imports of aluminum into the US, and this month made some adjustments. “This closed a critical loophole that previously allowed unfairly traded aluminum to enter the US market through the downstream goods,” Johnson said.
(By Tom Daly; Editing by Paul Simao)
Aluminum faces ‘black swan’ supply shock, Mercuria says
The global aluminum market is experiencing a “black swan” event as disruptions due to the Middle East war trigger a supply shock that will lead to major shortages this year, according to the top metals analyst at commodity trader Mercuria.
The region accounts for about 7 million metric tons of annual aluminum smelting capacity, or roughly 9% of the estimated global supply this year. Aluminum is a key material for the transport, construction and packaging industries.
“The scale of the supply shock we’re seeing in the aluminum market is probably the largest single supply shock a base metals market has suffered in the post-2000 era,” Nick Snowdon, head of metals and mining research at Mercuria, said on the sidelines of the Financial Times Commodities Global Summit in Lausanne, Switzerland.
“We are already in a ‘black swan’ event. No one could have foreseen something on this scale,” he told Reuters.
Concerns about supplies due to disruptions stemming from the US-Israeli war with Iran fuelled a rally on the London Metal Exchange, pushing aluminum prices to a four-year high at $3,672 a ton on April 16.
Mercuria estimates the market will face, at a minimum, a deficit of roughly 2 million tons between now and the end of the year. Snowdon said this estimate may prove conservative, as it assumes a near-term improvement in alumina flows via the Strait of Hormuz will enable some smelters to restart production this quarter.
“That shortfall compares with about 1.5 million tons of visible inventory and just over 3 million tons of total global stock, including non-visible units, leaving the market with limited buffers,” Snowdon said.
A larger deficit is possible if the conflict is extended and flows of alumina – a feedstock for aluminum production – to the Gulf are limited, he added.
Middle East aluminum cannot easily be replaced. In China, the world’s top producer, there is an annual output limit of 45 million tons, while the US and Europe have little idled capacity that could return.
Snowdon said the US and Europe were particularly exposed to the supply shock because of low stocks.
Of the 3.4 million tons of primary and alloyed aluminum that the US imported last year, the Middle East accounted for nearly 22%, according to Trade Data Monitor, an information provider.
Europe imported around 1.2 million tons, or 18.5%, of its primary and alloyed aluminum from the Middle East last year, according to TDM.
Premiums paid on top of the LME price for physical metal also have surged, hitting a record $1.14 per lb or $2,521.50 per ton in the US and a nearly four-year high of $599 per ton in Europe early in April.
(By Pratima Desai, Tom Daly and Polina Devitt; Editing by Paul Simao)
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