MYSTEEL: Middle East supply disruptions seen supporting China's aluminum prices

On March 18, the regional conflict had entered its third week, with its impact extending beyond market sentiment to materially disrupt primary aluminum smelting in several Middle Eastern countries, the report noted. For instance, on March 12 Qatalum, the 50/50 joint venture between Norsk Hydro and Qatar Aluminum Manufacturing, announced it would maintain output at around 60% of capacity due to reduced gas supply, following an earlier move to implement controlled production cuts. On March 15, Aluminium Bahrain reported a 19% reduction in output amid disruptions to raw material supply and transportation.

Within the region's aluminum supply chain, alumina, a key feedstock for primary aluminum smelting, has emerged as the most vulnerable link due to the heavy reliance of Middle East smelters on imports, the report said.

Approximately 67% of the Middle East's annual alumina demand is met through overseas supply, leaving aluminum smelters highly exposed to logistical disruptions. If shipping through the Strait of Hormuz does not return to normal within the next one to two weeks, continued interruptions to imported alumina shipments could trigger further production cuts across the region, Mysteel pointed out. 

The Middle East accounts for roughly 9% of global primary aluminum capacity and is a major exporter of the metal. In 2025, the region's primary aluminum exports are estimated to have reached about 4.51 million tonnes, with the United Arab Emirates, Bahrain, and Qatar as key suppliers, according to Mysteel's survey.

Further disruptions to production and exports in the region will likely tighten global aluminum supply. In turn, this will increase China's primary aluminum exports and reduce its imports. On the one hand, overseas buyers may increasingly turn to China, the world's largest primary aluminum producer, to secure alternative supply, boosting the country's export volume. On the other, reduced import availability could prompt some Chinese consumers to shift toward domestic material, further underpinning Chinese primary aluminum prices.

Besides being a massive producer of primary metal, China is also a massive importer. In 2025, the country exported 297,567 tonnes of primary aluminum, up 145.7% from 2024, while imports reached 2.54 million tonnes of the metal last year, up 18.8% on year, according to China Customs data. The country's net imports of primary aluminum reached 2.24 million tonnes.

By March 18, domestic aluminum prices had already risen noticeably in both the spot and futures markets compared with levels prior to the escalation of tensions from February 28. On Wednesday, Mysteel assessed the national average spot price for primary aluminum ingots with a minimum purity of 99.7% at Yuan 24,510/tonne ($3,552/t) including 13% VAT, up 4.7% from February 27. Meanwhile, the most-traded May aluminum contract on the Shanghai Futures Exchange closed the daytime trading session on March 18 at Yuan 24,800/t, up 3.7% from February 27.

The recent price rally is being attributed to geopolitical sentiment support, with some Chinese market participants expecting prices to retreat quickly once tensions ease and shipping routes normalize, Mysteel noted.

However, even if tensions subside and traffic through the Strait resumes, the supply-side damage and elevated costs will not be quickly reversed, Mysteel suggested. Restarting idled aluminum smelting capacity is a complex and time-consuming process, often taking several months and involving equipment maintenance, raw material restocking, and the normalization of logistics.

Moreover, the current disruption occurred at a time when the global aluminum market is already in a relatively tight supply-demand balance, rather than a supply surplus, according to the report. Production cuts in the Middle East, an upward shift in global costs driven by higher natural gas and electricity prices, and the reshaped trade flows are likely to provide sustained fundamental support for Chinese aluminum prices, it noted.

Written by Iris Pang, pangjunyu@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com