Middle East aluminium smelters drawn into the conflict, global aluminium supply shock risk rises

Overview

This report is Deutsche Bank's event-driven commentary on the global aluminium market, focusing on the potential impact of the Middle East conflict on smelting capacity, alumina supply chains, and aluminium premiums. Over the weekend, the two largest single-site aluminium smelters in the Middle East, Alba and Al Taweelah, were attacked. Although no deaths were reported, workers were injured at both sites, and the companies have not disclosed the extent of the damage or potential output losses.

Core views

The report's core view is that the Middle East has become an important aluminium supply hub outside China, and once regional smelters are drawn into the conflict, the risk of supply disruption rises materially. Because the region is highly dependent on imported alumina and shipping risk through the Strait of Hormuz is increasing, more smelters may cut output over the coming days or weeks as inventories are drawn down. Aluminium smelters are highly sensitive to uncontrolled power outages, so companies may choose controlled shutdowns in advance to reduce restart and ramp-up costs later. If the market begins to reprice Middle East supply risk, aluminium prices and European premiums could move higher again.

Analysis framework

The report uses an event-driven analytical framework, combining smelter attacks, alumina transport bottlenecks, regional capacity shares, announced cutbacks, and historical supply shock cases to assess the impact of the Middle East conflict on aluminium supply outside China and on price elasticity. It also maps the commodity price impact to related equity exposure, with particular attention to Hydro and RIO's aluminium sensitivity.

Methodology notes

• Event-driven commodity supply-demand analysisSupply shock risk assessment

  Judging the probability of near-term supply contraction through sudden conflict, capacity damage, logistics bottlenecks, and inventory drawdown.

  The report focuses on the likelihood that Middle East smelter attacks, dependence on alumina imports, and the possibility of controlled shutdowns could further tighten aluminium supply in the near term.

• Regional capacity share analysisShare of supply outside China

  Measuring the systemic impact of an event by comparing regional output with supply outside China and global supply.

  Middle East aluminium output in 2025 is about 6.7 mt, equal to roughly 23% of supply outside China and about 9% of global supply, so a local shock can have global pricing implications.

• Equity exposure mappingCommodity price sensitivity mapping

  Mapping changes in aluminium prices and premiums to EBITDA exposure at listed companies.

  The report highlights Hydro as a representative European aluminium exposure name, while noting that its Qatalum joint venture stake creates Middle East risk; RIO's aluminium business accounts for about 7% of group EBITDA.

Asset mapping & comparison

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

• Aluminium / LME aluminium

  Core commodity asset, directly affected by supply shocks and premium changes.

  Strengths

  Middle East supply risk, output cuts, and alumina bottlenecks may support prices.

  Weaknesses

  If actual production losses are limited or the conflict eases, the price gain may reverse.

  Comparison

  The report compares this with concerns over Russian supply disruptions in 2022, when aluminium prices briefly approached USD 4,000/tonne, although actual Russian production cuts were ultimately limited.

  Risks

  Conflict escalation, logistics disruptions, wider controlled shutdowns, inventory drawdown, and power outages.

• Hydro

  A European aluminium exposure name, referenced in the report as BUY.

  Strengths

  One of the few European stocks with meaningful aluminium exposure, and may benefit from higher aluminium prices and premiums.

  Weaknesses

  It has direct Middle East risk exposure through its 50% joint venture stake in Qatalum.

  Comparison

  Compared with more diversified large miners, Hydro's aluminium exposure is more concentrated.

  Risks

  Qatalum output cuts, alumina shortages, power disruptions, and regional conflict escalation.

• RIO

  A large miner whose aluminium business is part of group EBITDA.

  Strengths

  Higher aluminium prices can support earnings from the aluminium business.

  Weaknesses

  The aluminium business, excluding bauxite and alumina, accounts for only about 7% of group EBITDA, so group-level sensitivity is limited.

  Comparison

  Compared with Hydro, RIO has a lower share of group earnings tied to aluminium exposure.

  Risks

  The aluminium business is affected by commodity price volatility, energy costs, and supply chain disruptions.

• Middle East aluminium smelters

  The assets directly affected by the current supply shock.

  Strengths

  The region has large capacity and is normally a major source of global exports.

  Weaknesses

  It depends heavily on alumina imports and stable electricity supply, with some transport reliant on the Strait of Hormuz.

  Comparison

  The report says that if the Middle East is treated as a single region, its aluminium export volume exceeds Russia's, making it the world's largest export region.

  Risks

  Attack damage, worker safety, inventory depletion, costly alternative overland transport, uncontrolled power outages, and expanded controlled shutdowns.

Key data

• Alba capacity1.6 mtpaAluminium Bahrain's Alba is one of the Middle East's largest single-site smelters, and the report says it was attacked.
• EGA Al Taweelah capacity1.6 mtpaEGA's Al Taweelah is also one of the Middle East's largest single-site smelters, and the report says it was attacked.
• Qatalum and Alba already announced cutsnearly 600 ktpaAbout 2% of supply outside China.
• Middle East 2025 aluminium outputabout 6.7 mtFrom 11 smelters, equal to about 23% of supply outside China and about 9% of global supply.
• Iran aluminium output0.6 mtFrom five relatively small smelters; the report flags the data quality as low.
• UAE aluminium output2.7 mtOne of the Middle East's largest producers.
• Bahrain aluminium output1.6 mtOne of the Middle East's major aluminium producers.
• Middle East aluminium exports excluding Iranabout 5.4 mtAbout 17% of consumption outside China, exported to Asia, Europe, and the United States.
• Qatalum cut magnitude40%, about 260 ktpaQatalum's primary aluminium capacity is 648 ktpa, and casting capacity is 687 ktpa.
• Alba controlled shutdown impact19%, about 308 ktpaAlba has started a controlled shutdown of three production lines.
• Hydro exposure to Qatalum50% joint venture stake, about 5% of group EBITDA in 2025The report also notes Hydro as BUY.
• RIO aluminium exposureabout 7% of group EBITDAThis excludes bauxite and alumina operations.

Impact & implications

If the Middle East conflict continues to affect smelters, energy supply, or alumina transport, global aluminium supply outside China could tighten further, putting upward pressure on aluminium prices and European aluminium ingot premiums. For investors, beneficiaries include producers with upside exposure to aluminium prices; risks include companies with capacity or joint venture interests in the Middle East, downstream users dependent on regional supply, and smelter assets exposed to logistics and power disruptions.

Risks

• The conflict in the Middle East escalates further and more aluminium smelters are drawn in.
• Transport through the Strait of Hormuz is disrupted, worsening alumina import shortages.
• As alumina inventories fall, more smelters are forced to cut output or shut down.
• Uncontrolled power outages damage aluminium electrolytic cells, increasing restart and ramp-up costs.
• If companies choose controlled shutdowns, short-term supply contraction could widen.
• If actual production losses are lower than the market expects, aluminium price and premium gains may not be sustained.

What to watch

• Subsequent disclosure from Alba and Al Taweelah on damage severity and output losses.
• Whether Qatalum, Alba, and other Middle East smelters announce additional cuts or shutdowns.
• Whether alumina transport through the Strait of Hormuz is disrupted, and the cost and feasibility of alternative overland transport.
• Whether LME aluminium prices continue to trade near or above previous highs.
• Whether European aluminium ingot premiums continue their rapid rise.
• The marginal impact of Hydro's Qatalum exposure and RIO's aluminium business on group earnings.