Aluminum shock at steel mills, ports and sea routes to the Persian Gulf [ANALYSIS]

The global aluminum shortage, caused by shipping disruptions stemming from the blockade of the Strait of Hormuz, became a key issue to address in all leading markets in 2026. Aluminum smelters in Europe are slowly recovering. Bauxite exports from Guinea to the Arab market declined in 2026, while those to China surged to record levels.

The aluminum market proved sensitive to the Gulf War and had a significant impact on both the supply and demand sides of bauxite. Maritime logistics for both commodities had to be adjusted, especially since Chinese smelters decided to increase bauxite imports in 2026. With the sudden changes in demand, the Middle East, with its aluminum production, has become increasingly important for importers.

“The conflict has shaken the aluminum market, which accounts for 9% of global aluminum supply and approximately 20% of European imports,” warns Sophie Dyas of S&P Global. It reports that “Platts, part of S&P Global Energy, has estimated the July 6 IW Rotterdam P1020 duty paid price in the range of $525-$560/tonne, a 64.4% increase compared to mid-year. Platts has estimated the July 6 IW Rotterdam P1020 duty unpaid price in the range of $470-$500/tonne, a 73.2% increase compared to mid-year on January 2.”

Aluminum prices in Rotterdam and Japan. Source: S&P Global Energy

According to the International Aluminum Institute (IAI), global primary aluminum production reached approximately 73.8 million tons in 2025. Five leading smelters in the Persian Gulf region accounted for approximately 6.16 million tons of supply, or about 8% of global supply. This Arab production is primarily intended for export. While the supply is not impressive, it is crucial for maintaining market balance.

Hormuz and Aluminum

The blockade of the Strait of Hormuz is not the only reason for the reduction in aluminum supply. Emirates Global Aluminum (EGA) was forced to suspend production at its large Al Taweelah complex in Abu Dhabi. The facilities were damaged by missile and drone attacks in late March 2026. Production lines and the alumina refinery are gradually being restarted.

Aluminum producer Hydro also announced it was in a crisis situation. Customers were informed that it was operating under a higher risk status. The Qatalum smelter in Qatar, with a capacity of over 650,000 tons per year, was forced to shut down production due to a gas supply disruption. In 2025, Qatalum produced approximately 687,000 tons of primary aluminum, slightly exceeding its nominal capacity.

The international impact of the war is evidenced by the fact that Qatar Aluminum Manufacturing Company (QAMCO) reported a net profit of QR768 million (approximately USD211 million) for the full year 2025. Qatalum, a 50% shareholder owned by QAMCO, generated adjusted net income of NOK1.3 billion.

The plant shutdowns will result in significant losses in 2026. Qatalum is a joint venture. Qatar Aluminum Manufacturing Company (QAMCO) holds a 50% stake in Qatalum, and Norsk Hydro (Hydro Aluminum Qatalum Holding B.V.) holds the remaining 50%. QatarEnergy, in turn, holds a 51% controlling interest in QAMCO.

However, a return to full capacity will only be achieved after the reconstruction of all elements of the complex. Bringing in new plant components and restoring operational capacity will likely take at least a year. EGA is estimated to have produced 2.4 million tons of alumina in 2025, meeting 46% of the raw material demand. The main production facility was idle for over three months before being restarted in July of this year.

Aluminum smelters in the Persian Gulf, source: S&P Global

Karen Norton, deputy director of aluminum research at S&P Global Energy CERA, said: “We expect weakening supply to have an increasing impact on prices in the second half of the year, but this will not be a one-way street,” according to Sophie Dyas of S&P Global.

“Prices may spike periodically on supply-related news, such as delivery delays or production disruptions, but the upward trend is unlikely to last,” Norton added. “Issues could include difficulties restarting smelters in the Middle East after previous curtailments or delays in bringing new capacity online in Indonesia.” Full capacity expected in a year.

EGA anticipates a return to full capacity only by the end of this year. Furthermore, there have been production shutdowns in the region at Alba Aluminum Bahrain. In the first quarter of 2026, production in Aluminum Bahrain (Alba) declined due to supply disruptions and the partial shutdown of furnaces. After a 14% decline, production reached almost 340,000 tons year-on-year, and sales volume approached 312,600 tons. Exports declined 17% year-on-year.

IAI analysts covering the region forecast industry-wide losses of between 3 and 3.5 million tons by 2026. This represents a reduction in supplies of approximately 5%. Currently, inventories in London Metal Exchange warehouses are estimated to have fallen below 300,000 tons for the first time since 2022. This situation is due to supply constraints and strong demand, pushing 3-month contract prices to around $3,165 per ton.

Japanese Aluminum Price Games

Japan is a spectacular example. The Japanese aluminum price has recently risen from $86 per ton to $351.50 per ton over the past six months. This has fundamentally changed the way this benchmark determines prices and dictates trading conditions in the Asia-Pacific region, Muflih Hidayat writes on AlCircle.com.

Hidayat emphasizes that “Japan holds a decisive position as the largest importer of primary aluminum in Asia. This gives its quarterly settlements a significant impact on the entire region.” South Korean producers, Taiwanese manufacturers, and processors in Southeast Asia refer to JMP [Japan Main Ports – MG] settlements when setting their contract prices. “The benchmark not only reflects Japanese market conditions but also forms the basis of the physical pricing architecture throughout the supply chain in the Indo-Pacific region,” explains Muflih Hidayat.

Japan is a major exporter of aluminum products. According to international trade data tracked through the World Bank WITS platform, total exports of aluminum and aluminum products reached approximately $2.7 billion in 2025. Japan exported aluminum products to China ($924 million), Korea ($280 million), Thailand ($228.4 million), Malaysia ($202.4 million), and the United States ($190 million), according to World Bank WITS.

Japanese aluminum and its components are highly dependent on maritime transport. Therefore, aluminum prices on the market are influenced by sea freight rates between production regions and Japanese ports. The previously mentioned levels of inventory in LME warehouses and their expected availability also play a significant role. Domestic market activity, particularly demand from producers in the automotive, packaging, and construction markets, is also important.

Aluminum Stalemate in the Strait of Hormuz

Similar factors are impacting the operations of aluminum smelters in the Persian Gulf region. The Middle East accounts for approximately 8% of primary aluminum supplies, which proved very painful for some customers during the closure of the Strait of Hormuz, as major smelters operate in countries such as the United Arab Emirates, Bahrain, Saudi Arabia, and Oman.

Oman is virtually the only country with a production facility and a port for importing components located outside the Persian Gulf. Aluminum production is profitable in Arab countries because production plants benefit from access to cheap energy. Its share of aluminum production costs makes the region competitive and aluminum production profitable.

The disadvantage of this solution is that aluminum smelters in the Persian Gulf are not self-sufficient in raw materials. They depend on the flow of the Strait of Hormuz and the stability of sea routes.

The owners of aluminum smelters operating in the Persian Gulf are importers of alumina, an intermediate product refined from bauxite, which is used as a feedstock for reduction electrolyzers. The end result is the production of primary aluminum. The alumina supplied to smelters in the Persian Gulf comes primarily from Australia, Guinea, and Brazil, all of which use the maritime transit routes through the Strait of Hormuz. Until now, aluminum smelters’ production has reached the global market via this route. And so the aluminum circle closes. Or rather, the aluminum circle is squared.