GCC aluminum smelters face dual pressure from logistics and power; output may fall from 6.0mnt before the conflict to 3.5-4.0mnt in a long-term scenario

Overview

This report summarizes the key takeaways from Goldman Sachs' expert call on operational risks and the outlook for Middle Eastern aluminum smelters. The expert has 15 years of GCC experience and previously worked on strategy and corporate development at Emirates Global Aluminum, with deep familiarity with aluminum supply and demand, trade flows, pricing, and contingency planning for a Strait of Hormuz closure. The report focuses on how the Middle East conflict affects GCC smelters' power supply, raw material imports, export logistics, output scenarios, restart cycles, and future expansion strategies.

Core views

Experts believe the GCC smelter business model depends on imported alumina, petroleum coke, and liquid pitch, and on converting local natural gas power into aluminum metal for export. This model has long been vulnerable to logistics disruptions, and the current conflict has made that risk explicit. Annualized output has already fallen from roughly 6.0mnt before the conflict to about 5.2mnt, including about 550kt of voluntary cuts at Alba and Qatalum and additional impact after drone attacks. If the crisis persists, output could fall to about 4.6mnt within 4-8 weeks; in a long-term disruption scenario, it could remain at 3.5-4.0mnt. In a high-aluminum-price environment, smelters tend to absorb extra logistics costs to keep production running, but bottlenecks in power, raw materials, trucking, and ports could still force additional cuts.

Analysis framework

The report uses expert interviews and scenario analysis, splitting GCC aluminum supply into pre-conflict levels, already-announced voluntary cuts, additional impacts after drone attacks, 4-8 week crisis continuation, and long-term logistics disruption scenarios. It combines each smelter's geographic location, port accessibility, raw material sources, power supply, and transport radius to assess sustainable production capacity.

Methodology notes

• Expert interviewExpert Call Takeaways

  Operational risk scenario assessment

  Uses judgments from an expert with GCC aluminum industry experience to assess the impact of conflict, logistics, and power risks on smelter production, restarts, and expansion plans.

• Scenario analysisAluminum production scenarios

  Scenario-based output estimation

  Using 6.0mnt before the conflict as the baseline, the report incrementally evaluates 550kt of voluntary cuts, 5.2mnt after drone attacks, 4.6mnt in a 4-8 week continuation scenario, and about 3.8mnt in a long-term crisis scenario.

• Company disclosure appendixGS Factor Profile

  Growth, financial returns, valuation, and composite percentile comparison

  The appendix explains how Goldman Sachs compares stocks with the market and peers using growth, financial returns, valuation multiples, and composite metrics, but this framework is not the core analytical tool for this expert call.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Aluminum

  Core impacted commodity

  Strengths

  High aluminum prices improve smelters' ability to absorb alternative logistics costs, and parts of the Sohar route can support U.A.E. and Oman capacity.

  Weaknesses

  Production is highly dependent on imported alumina, petroleum coke, liquid pitch, or finished anodes, and electrolysis cells are extremely sensitive to shutdowns.

  Comparison

  Compared with steel, aluminum smelting carries a cell-freezing risk, so restart cycles and capital damage are more severe after uncontrolled shutdowns.

  Risks

  A Strait of Hormuz closure, disruption to Bab el-Mandeb in the Red Sea, attacks on gas fields or pipelines, truck shortages, and border clearance delays could lead to further production cuts.

• GCC aluminum smelters

  Regional capacity platform

  Strengths

  They have local natural gas energy and a complete aluminum value chain, and historically have had an appetite for expansion.

  Weaknesses

  Their business model depends on cross-sea imports of raw materials and exports of metal, so logistics disruptions directly challenge sustainable production.

  Comparison

  EGA Al Taweelah, EGA Jebel Ali, and Sohar benefit more from the Sohar route; Alba, Ma'aden, and Qatalum are more constrained by long-distance overland transport.

  Risks

  Prolonged conflict may pause regional expansion and push companies to look for overseas capacity options in the US, Europe, and elsewhere.

• Steel

  Adjacent impacted industry

  Strengths

  GCC steelmakers can also seek alternative logistics routes and do not face the risk of aluminum cell freezing.

  Weaknesses

  They still depend on imported raw materials such as iron ore and face pressure on ports and trucking.

  Comparison

  Operational sensitivity is lower than in aluminum smelting, but the logistics challenges are similar.

  Risks

  If alternative routes remain tight, raw material supply and production costs may still worsen.

• Fertilizers and petrochemicals

  Regional spillover sectors

  Strengths

  Saudi Arabia has resource advantages such as phosphate ore.

  Weaknesses

  Higher oil and gas costs, logistics disruptions, and export uncertainty will affect production and trade.

  Comparison

  The report suggests fertilizers and petrochemicals may be affected more significantly than steel.

  Risks

  Rising energy and fertilizer prices could pass through to global inflation and everyday living costs.

Key data

• GCC aluminum supply shareabout 7% globally, about 18% outside ChinaExperts said GCC smelters are especially important to markets such as the US, EU, Japan, Thailand, and Malaysia.
• Pre-conflict GCC annualized aluminum output6.0mntBaseline output in the chart scenario.
• Current annualized output5.2mntIncludes about 550kt of voluntary cuts and additional impact after the drone attacks.
• 4-8 week crisis continuation scenario output4.6mntIf the crisis continues, Alba and Qatalum could cut production further.
• Long-term disrupted scenario output3.5-4.0mntAbout 3.8mnt in the chart's long-term crisis scenario.
• Additional trucking costat least US$200-300/tExperts expect alternative-route transport to raise aluminum production costs, though current high aluminum prices may absorb the hit through margins.
• Restart cycle for controlled shutdowns2-4 monthsApplies to voluntary cuts or controlled shutdowns such as those at Qatalum and Alba.
• Restart cycle for uncontrolled shutdowns6-8 monthsIf drone attacks cause electrolytic cells to freeze, facility damage would require a longer repair cycle.
• Total major aluminum smelting capacity in the Middle Eastabout 7.1mntThe table lists the capacities of Alba, EGA Al Taweelah, EGA Jebel Ali, Ma'aden, Qatalum, Sohar Aluminum, and Iranian smelters.

Impact & implications

In the short term, aluminum supply disruptions and higher logistics costs may support aluminum prices and affect users in the US, Europe, and Asia that rely on Middle Eastern supply. In the medium term, if security risks in the Strait of Hormuz and the Red Sea persist, smelters such as Alba, Ma'aden, and Qatalum that depend on long-distance alternative transport face greater production-cut risk. In the long term, the GCC expansion model based on low-cost energy, imported raw materials, and metal exports is being questioned. New regional aluminum capacity and Chinese-backed greenfield projects may be delayed, and companies such as EGA and Alba may place greater emphasis on overseas capacity expansion. Steel, fertilizers, and petrochemicals that rely on imported raw materials or energy may also suffer similar shocks, adding pressure to global inflation.

Risks

• The Strait of Hormuz remains impassable, blocking imports of alumina, petroleum coke, pitch, and other raw materials.
• Qatar gas facilities, pipelines, refineries, or power-related assets are attacked again, triggering more voluntary cuts.
• The Sohar, Red Sea, or Bab el-Mandeb routes are constrained, preventing alternative supply chains from reliably covering western Gulf smelters.
• Long-distance overland transport of liquid pitch is disrupted, forcing smelters to import finished anodes and increasing supply-chain complexity.
• Uncontrolled shutdowns lead to electrolytic cell freezing and equipment damage, extending restart cycles to 6-8 months.
• Ports and truck resources are prioritized for essentials such as food and pharmaceuticals, squeezing out industrial raw material transport.
• If the risks persist for a long time, GCC aluminum expansion and Chinese-backed greenfield projects may be delayed or paused.

What to watch

• Whether Alba and Qatalum cut production further over the next 4-8 weeks.
• Whether Sohar port and Oman overland transport can continue supplying U.A.E. and Oman smelters.
• The safety situation at Saudi Arabia's Red Sea ports, the Jeddah route, and Bab el-Mandeb.
• Raw material inventories, anode procurement, and production adjustments at western Gulf smelters such as Qatalum, Alba, and Ma'aden.
• Repair progress on damaged power and smelting equipment after the drone attacks.
• Whether GCC aluminum companies continue to push new lines or shift toward overseas capacity investment in the US, Europe, and elsewhere.
• How aluminum, oil and gas, fertilizer, and steel prices react to logistics disruptions and regional conflict.