Two major aluminum plants in the Middle East are attacked; approximately 10% of global supply could be impacted?

Under ongoing turmoil in the Middle East, in addition to pressure on oil trade, global aluminum supply chains have also started to be affected.

According to a report by Xinhua News Agency on March 29, two large aluminum plants located in Bahrain and the United Arab Emirates—Gulf countries—have recently confirmed that they were attacked by Iran. The attack resulted in injuries and property damage. Aluminum products exported from the Middle East account for about 10% of global supply and may cause some impact on the market.

Visual China

On the morning of March 30, a person in China’s aluminum industry told a reporter from The Daily Economic News that this attack on an aluminum plant has sparked market panic about possible breaks in the supply chain. London Metal Exchange (LME) aluminum futures prices and individual A-share stocks in the aluminum sector all rose to varying degrees that day.

On one side, there is the heavy pressure of a possible break in overseas supply chains and a surge in aluminum costs per ton; on the other side, domestic aluminum companies are seizing export order bonanzas by taking advantage of the decline in the Shanghai-London ratio average. In this aluminum-market shock triggered by the U.S.-Israel-Iran conflict, the global map of the aluminum industry is undergoing profound reshaping and reshuffling.

Supply chain fragility is becoming apparent

The continuous deterioration of the Middle East situation is sending strong danger signals into the global aluminum supply chain.

On March 29, the Iranian Islamic Revolutionary Guard Corps issued a statement confirming that it used missiles and drones to strike two aluminum plants in the UAE and Bahrain that are related to U.S. military and aerospace industries, as retaliation for the U.S. and Israel’s prior attacks on Iran’s civilian facilities such as steel plants.

The direct victims of Iran’s strikes are the UAE-based Global Aluminum (EGA), one of the world’s largest aluminum producers, and Alba (Bahrain Aluminum). It is reported that EGA has two factories in the Middle East; in 2025, it produced approximately 1.6 million tons of primary aluminum, accounting for more than 2% of global share.

EGA confirmed that one of its plants located in the industrial zone of Abu Dhabi suffered significant losses in an attack on March 28, and that multiple laborers of Indian and Pakistani nationality were injured. Alba said on March 29 that the company’s factory was hit on March 28, causing two people with minor injuries. The company is currently assessing property damage.

In fact, the crisis in the Middle East aluminum market has not come out of nowhere; the fragility of the supply chain had long been exposed.

Even before this round of strikes, the transportation of aluminum products and raw materials in the Middle East had already been heavily affected due to disruptions in shipping through the Strait of Hormuz. CICC Securities (600030) said that on March 12, Qatar’s Qatalum aluminum plant (nominal annual primary aluminum capacity of 636,000 tons) announced a shutdown of 40% of capacity due to a cut in natural gas supply; on March 15, Alba (annual capacity of about 1.6 million tons) announced that it was hit by “force majeure” due to obstruction of the Hormuz Strait shipping route, cutting production by about 20%. The combined capacity impact of these two major projects accounts for 0.7% of global capacity.

“Up to now, neither of the two companies has formally announced that capacity operations have suffered a substantial interruption.” Zhang Meng, an analyst at Aize Consulting, told a reporter from The Daily Economic News. Global Aluminum has two factories in the Middle East, and produced about 1.6 million tons of primary aluminum in 2025. If everything were to stop, then the impact would be very significant. Primary aluminum of 1.6 million tons basically accounts for more than 2% of global share.

Judging from the overall distribution of global capacity, the Middle East region’s primary electrolytic aluminum capacity accounts for nearly 9% of the world total, and its export volume accounts for about one-tenth of global supply. Guoxin Futures’ analysis believes that although the two attacked enterprises have not formally announced a substantial interruption to their capacity operations, under extreme scenarios, the Middle East region may see production interruptions in about 2.8 million tons of electrolytic aluminum capacity, roughly 3.5% of global aluminum capacity.

CICC Securities also commented that the fact that aluminum plants were directly attacked further raises the risk of production disruption in the Middle East region. Equipment damage will lead to longer-cycle capacity reductions, shutdowns, and restarts, having an even more far-reaching impact on supply and demand.

In Zhang Meng’s view, the market’s focus at present is mainly on whether the relevant enterprises were damaged and shut down. The subsequent price trend will depend on the final assessment results of the capacity damage published by the relevant aluminum companies, as well as how the evolution of the geopolitical situation affects market risk appetite and changes in macro liquidity expectations.

Institutions are bullish on aluminum prices in the short term

The escalation of geopolitical conflicts has fueled panic about possible breaks in the supply chain and has also ignited bullish sentiment in capital markets.

A reporter from The Daily Economic News noted that LME aluminum futures prices have performed strongly within March. The peak rose to $3,546.5 per ton, setting a nearly four-year high. On March 30, LME aluminum futures prices surged sharply. The opening price was $3,400 per ton; during trading, it once hit as high as $3,492 per ton and dipped to as low as $3,400 per ton. By contrast, Shanghai aluminum quotations also moved up in tandem, and at one point approached the high of 26,000 yuan per ton, but overall gains were weaker than those of LME aluminum. On the morning of March 30, the front-month contract of Shanghai aluminum futures rose by more than 3% intraday; the Shanghai aluminum 2605 call option 27,000 contract jumped by 160.00%.

Although domestic futures prices increased relatively mildly, the aluminum sector in the A-share market saw a surge to daily limit-up. By the close on March 30, stocks such as Tianshan Aluminum (SZ002532), Minfa Aluminum Industry (002578) (SZ002578), Changlu Shares (002160) (SZ002160), and Yiqiu Resources (601388) (SH601388) hit the daily limit. Huaxi Securities (002926) pointed out that if, going forward, a series of announcements about production cuts and shutdowns are densely rolled out, the room for further declines in aluminum prices would be extremely limited, and it has value for left-side attention.

Behind the rise in futures prices is the sharp surge in the global electricity cost per ton of aluminum. China Post Securities said that since the outbreak of the Middle East conflict, natural gas prices have skyrocketed. The power cost for electrolytic aluminum per ton in regions that rely on natural gas power generation is significantly higher than that in the earlier period. It is expected that even if the Middle East situation eases later, as long as the risk premium of the Strait of Hormuz remains at a high level, the marginal advantage of ultra-low-cost capacity in the Middle East may weaken over a fairly long period.

China Post Securities further predicted that if the conflict continues, with natural gas power generation costs moving higher and raw material shortages stacking on top, aluminum prices may rise to 30,000 yuan per ton.

What is worth noting is that amid this global capacity crisis, China’s aluminum processing companies have actually received a tangible “export bonus.” Because Shanghai aluminum has risen notably less than LME aluminum recently, as of March 26, the Shanghai-London ratio average was 7.36, down from 7.86 in the same period last year. This has greatly increased the export price advantage of domestic aluminum sheet and foil products.

Aize Consulting’s research shows that major aluminum sheet and foil enterprises in Henan are currently keeping production load at full capacity. In recent days, export orders increased by 15% month over month. A large company in Shandong also operates production lines at full load due to a widening price gap between domestic and international markets and overseas orders flowing out; and it is expected that this export order bonus will continue through June 2026.

At the same time, strong performance from domestic listed aluminum companies has also injected a strong boost of confidence into the market. Taking Tianshan Aluminum as an example, its 2025 annual performance report shows that in 2025, it achieved operating revenue of 29.502 billion yuan and net profit of 4.818 billion yuan, and plans to distribute cash dividends of 1.147 billion yuan. Even more encouraging to the market, the company expects net profit of 2.2 billion yuan in the first quarter of 2026, up more than 100% year over year—again breaking the historical high for quarterly performance.

Looking ahead, the resilience of industry demand on the demand side should not be underestimated either. CICC Securities expects that in 2026, the power grid and automotive sectors will continue to maintain high levels of activity, thereby supporting the momentum for growth in electrolytic aluminum demand. It expects aluminum prices in 2026 to reach 23,000 yuan per ton.

Guoxin Futures emphasized that it is still necessary to closely monitor whether further recovery in the automotive consumer market will pull up downstream demand. Huaxi Securities believes that as electrolytic aluminum is a rigid-demand industrial product, the historical decline in consumption during downcycle periods is only 1% to 2%. The contraction is far smaller than the supply side. If announcements about production cuts and shutdowns are densely rolled out, there would be extremely limited room for further aluminum price declines.

(Editor: Zhang Yang HN080)

     【Disclaimer】This article only represents the author’s personal views and is not related to Hexun.com. The statements and judgments made in this article by the Hexun website remain neutral, and the website provides no express or implied guarantees regarding the accuracy, reliability, or completeness of the contents. Readers are only advised to use this information as reference and bear all responsibility themselves. Email: news_center@staff.hexun.com