Analysis of the Impact of the Middle East Situation on the Aluminum Industry Chain
1. Ample Bauxite Supply Despite Rising Shipping Costs
Our country's bauxite production in February was 4.7567 million tons, down 10.92% month-on-month but up 6.13% year-on-year, indicating ample domestic supply. Regarding imported ore, my country imported 14.67 million tons of bauxite in December, down 2.88% month-on-month and 2.02% year-on-year, also indicating ample supply. However, rising shipping costs have led to a gradual increase in shipping costs due to rising crude oil prices.
In terms of new capacity, the increase in global bauxite production in 2026 will still mainly come from Guinea. Based on the expected increase in production from local companies that have already started production, resumed production, or expanded production, the global bauxite supply is expected to increase by about 40-50 million tons in 2026. Excluding potential policy disruptions, the bauxite market supply is expected to remain ample in 2026.
2. Alumina Supply Pressure Remains, But Costs Rise
In February, my country's metallurgical-grade alumina production was 6.6002 million tons, down 10.63% month-on-month and 0.05% year-on-year. A large-scale production cut by a company in northern China in the middle of the month, coupled with equipment maintenance and production line upgrades by some companies, and reduced operating loads by some companies in the south, led to a slight contraction in overall monthly production. In March, some companies may continue maintenance and production line upgrades, and the industry will enter a phase of destocking. However, new production capacity in Guangxi is gradually being released, offsetting some of the reduction, and overall operating capacity is expected to show a slow downward trend.
In February, overseas metallurgical-grade alumina production was 4.42 million tons, down 12.41% month-on-month and 3.66% year-on-year, indicating relatively stable overseas alumina production during the month. On February 28, the conflict between Iran and Israel escalated, with the Iranian capital, Tehran, being attacked. Currently, there are no reports of alumina plants in the region shutting down. According to SMM statistics, Iran has only one alumina plant with bauxite production capacity. If geopolitical tensions escalate, the plant's production may be affected, and the possibility of production cuts or shutdowns cannot be ruled out. Data shows that Iran's alumina production is approximately 250,000 tons, and its bauxite production is approximately 650,000 tons. Its alumina production cannot meet its domestic electrolytic aluminum production needs, and it has long relied on imports, with India being the main source, accounting for 40% to 80% of its total alumina imports.
In terms of new capacity, there is still a large amount of alumina capacity to be released both domestically and internationally in 2026. It is estimated that the new domestic capacity will be about 15 million tons, mainly in Guangxi and Hebei provinces, while the new overseas capacity will be about 7.5 million tons, mainly concentrated in India. The supply side of alumina is under great pressure.
In December, my country exported 205,900 tons of alumina, up 22.56% month-on-month and 9.35% year-on-year, while importing 227,800 tons, down 1.98% month-on-month but up 1389% year-on-year. Net imports in December were 21,900 tons. In terms of alumina import and export destinations, the Middle East accounts for a relatively small proportion.
Regarding inventory, as of March 5, my country's total alumina inventory was 5.722 million tons, continuing to increase. The increase mainly came from in-transit inventory and port inventory, while futures inventory rose to over 330,000 tons.
3. Disruptions in Electrolytic Aluminum Supply
Domestic electrolytic aluminum production in February was 3.46 million tons, up 3.6% year-on-year and down 8.91% month-on-month. Affected by the Spring Festival holiday, the overall operating rate of downstream industries declined, and the proportion of molten aluminum also fell significantly, decreasing by 7.7 percentage points to 64.4% compared to January. Based on the molten aluminum ratio, domestic electrolytic aluminum ingot casting volume in February increased by 25.8% year-on-year and 16.2% month-on-month. Entering March, with the recovery of natural days, electrolytic aluminum production is expected to rebound month-on-month.
Overseas electrolytic aluminum production reached 2.37 million tons in February, a year-on-year increase of 2.5%. Newly commissioned electrolytic aluminum projects in Indonesia and Angola continued to ramp up production, resulting in a month-on-month increase of 0.9% in average daily overseas output. In March, the operating capacity of newly commissioned electrolytic aluminum projects in Indonesia and Angola is expected to continue to increase, but there is a risk of production cuts or shutdowns at aluminum plants in Mozambique.
In 2025, the total electrolytic aluminum production capacity in the Middle East was 6.92 million tons, with an actual output of approximately 6.85 million tons, accounting for 9% of the global aluminum ingot supply. The Middle East's annual demand for alumina from electrolytic aluminum production was approximately 13.75 million tons, while its internal alumina production capacity was only 4.35 million tons, requiring substantial imports to maintain production. However, the stagnation of the Strait of Hormuz poses a risk of alumina supply disruption for electrolytic aluminum production. On March 3rd, affected by a natural gas shortage in Qatar, Hydro's joint venture, Qatar Aluminium, began a phased shutdown of its aluminum production lines. Qatar Aluminium's annual primary aluminum production capacity is 636,000 tons, and its casting workshop capacity is 664,000 tons. On March 4th, Bahrain Aluminium was affected by a sudden force majeure event, impacting the fulfillment of its supply contracts. Bahrain Aluminium's 2025 electrolytic aluminum production was reportedly 1.622 million tons. As of March 4th, 2026, the company continued electrolytic aluminum production, but due to the stagnation of the Strait of Hormuz, the company was unable to deliver aluminum ingots normally.
On the energy front, large-scale aluminum plants globally, primarily powered by natural gas (including LNG), are highly concentrated in the Middle East, followed by a few projects in Europe, South America, and Africa, collectively accounting for approximately 13% of global electrolytic aluminum production capacity (about 8-9 million tons).
Regarding imports and exports, China imported 189,200 tons of primary aluminum in December, while exporting 37,600 tons, resulting in net imports of 151,600 tons. By 2025, my country is projected to import 2.54 million tons of electrolytic aluminum, of which 48,700 tons will be imported from the Middle East, accounting for 1.9% of total imports.
4. Summarize
Overall, the situation in the Middle East has not yet had a significant impact on global bauxite supply. However, from a freight perspective, the continued rise in ocean freight has increased bauxite transportation costs, thus supporting domestic imported ore prices. Regarding alumina, given that the Middle East is a net importer of alumina, the disruption in transportation has led to increased supply from non-Middle Eastern regions. However, the rising prices of energy and raw material caustic soda have also strengthened cost support for alumina. As for electrolytic aluminum, the Middle East is a net exporter of electrolytic aluminum, and the geopolitical situation has a significant impact on local electrolytic aluminum companies. From a global supply perspective, the situation has already had a substantial impact on electrolytic aluminum supply, making its influence even more pronounced.
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