Middle Eastern war flames have reached the cars

Ask AI · Why Does the Middle East Conflict Make Aluminum a Weak Spot in the Automotive Industry?

“The Middle East conflict is derailing the automotive industry.”

A recent analysis published by Forbes magazine states that this conflict is a “disaster” for the automotive sector.

Among the victims, aluminum is the latest casualty.

On March 29, the Islamic Revolutionary Guard Corps of Iran issued a statement saying that the Guard used missiles and drones to strike two aluminum plants related to the U.S. military and aerospace industry within the UAE and Bahrain.

As a result, the capacity of the Gulf region’s three major aluminum giants—UAE Global Aluminum, Bahrain Aluminum, and Qatar Aluminum—has been disrupted. Bahrain Aluminum operates the world’s largest single aluminum smelter, with an annual capacity of 1.6 million tons.

Data from ANZ Bank shows that the Middle East accounts for 9% of global aluminum production. Due to supply restrictions in specific regions, this area can meet 18% of global demand. Currently, export volumes of 4 to 5 million tons face risks.

According to German automotive trade publication AMS, 70% of processed aluminum for Japanese automakers comes from the Middle East, while 20% of aluminum imports for U.S. manufacturers originate from the region. South Korea and other automotive industries also rely on Middle Eastern aluminum.

Aluminum is precisely the most critical yet underestimated link in the automotive supply chain.

According to AMS analysis, an average passenger car uses over 200 kilograms of aluminum. Body panels, suspension, power systems—all depend on it.

[Photo] China News Service reporter Fan Xiaoheng took the photo.

New energy vehicles are even more affected. Lin Boqiang, director of the China Energy Policy Research Institute at Xiamen University, told Sanlihe that aluminum is the skeleton material of new energy vehicles. Shortages of aluminum could lead to raw material shortages, and rising aluminum prices will increase manufacturing costs, both of which could impact production.

Bloomberg reported that on March 30, aluminum prices on the London Metal Exchange (LME) surged by 5.5%, reaching $3,492 per ton, a new high since April 2022. Since the outbreak of the conflict, aluminum prices have increased by a total of 10%, with “war premium” continuing to spread.

Ross Strockan, head of raw materials at CRU Group, warned that given current inventory levels, supply disruptions could cause aluminum prices to soar to $4,000 per ton.

For automakers, this means that every car body panel and suspension arm will see rising costs.

According to the latest data from market research firm MarketsandMarkets, due to the conflict, the global growth rate of light vehicles is expected to slow from the previous forecast of 3.8% to between 0% and 2%.

So, can we do without aluminum?

“Currently, it’s difficult,” Lin Boqiang admitted. He said relevant research is underway, and recent developments may include magnesium-aluminum composites, but the goal is to find cheaper and more practical materials.

Meanwhile, the energy crisis continues to burn.

Automobiles are undoubtedly major energy consumers. AMS estimates that at a oil price of $70 per barrel, automakers can barely turn a profit, but at the current $110 per barrel, profitability is impossible.

And that’s just the tip of the iceberg.

Analysts say that a typical car contains 150 to 200 kilograms of plastic and polymer components. The basic raw material for these chemicals—naphtha—is about 40% supplied from the Gulf region.

A more hidden danger is helium.

Qatar produces about one-third of the world’s helium, which is indispensable in semiconductor manufacturing.

Currently, helium supplies face potential disruption, just as demand for automotive chips surges due to digitalization and intelligence, making semiconductor manufacturing costs almost certain to rise.

Without chips, cars cannot be built, directly impacting automotive production plans.

The most immediate impact is on the Middle Eastern auto market.

Toyota has announced it will cut nearly 40k vehicles destined for the Middle East. Nissan is also adjusting its production plans.

Volkswagen CEO Oliver Blume pointed out that the conflict could weaken demand for high-end cars in the region, especially worrying about brands like Porsche and Audi.

Why? Because the Middle East is a profit cow for luxury cars.

According to analysis by Metzler Research Analyst Pål Skilta, the region’s annual car sales are about 3 million units. In the UAE alone, annual sales exceed 300k, with about 20% being high-end imports.

Now, the war has directly reached this “cash cow.”

Ultimately, the risk premium may be borne by workers who lose their jobs due to production halts, or by every consumer who gets behind the wheel.

Sanlihe Studio