The shadow of geopolitical conflict looms over global commodity markets, with a "black swan" event in the Middle East vigorously flapping its wings, pushing the global aluminum supply chain into a precarious position.
According to a Xinhua News Agency report on March 29, two large aluminum plants located in the Gulf nations of Bahrain and the United Arab Emirates recently confirmed being attacked by Iran. The attacks resulted in personnel injuries and property damage. Aluminum products exported from the Middle East account for approximately 10% of global supply, potentially causing significant market disruption.
On the morning of March 30, an insider from the domestic aluminum industry stated that the attacks have triggered market fears of a supply chain breakdown. Consequently, aluminum futures prices on the London Metal Exchange (LME) and share prices of aluminum sector stocks in the A-share market saw increases of varying degrees.
The aluminum market is caught between the heavy pressure of overseas supply chain disruptions and soaring production costs per ton on one side, and the benefits reaped by domestic Chinese aluminum enterprises on the other. These benefits stem from a decline in the Shanghai-London price ratio leading to a surge in export orders, coupled with robust domestic demand supported by sustained high growth in downstream industries like automotive. This geopolitical crisis-induced turmoil is driving a profound reshaping and realignment of the global aluminum industry landscape.
**Institutional Analysis: Up to 2.8 Million Tons of Capacity Potentially Idle in Extreme Scenarios**
The continued deterioration of the Middle East geopolitical situation is sending strong danger signals to the global aluminum supply chain.
On March 29, Iran's Islamic Revolutionary Guard Corps issued a statement confirming it used missiles and drones to strike two aluminum plants in the UAE and Bahrain, which it claimed were linked to the US military and aerospace industries. This action was stated as retaliation for previous US-Israeli attacks on Iranian civilian facilities, including a steel plant.
The direct victims of this conflict are Emirates Global Aluminium (EGA), one of the world's largest aluminum producers, and Aluminium Bahrain (Alba). Reports indicate that EGA operates two plants in the Middle East, producing approximately 1.6 million tons of primary aluminum in 2025, accounting for over 2% of the global market share.
EGA confirmed that one of its plants in an Abu Dhabi industrial zone sustained significant damage during the attack on the 28th, with several Indian and Pakistani workers injured. On the same day, a facility operated by Aluminium Bahrain was also hit, resulting in two minor injuries, and the company is currently assessing property damage.
In reality, the crisis in the Middle Eastern aluminum market did not emerge suddenly; vulnerabilities in the supply chain were already apparent. Even prior to these missile attacks, the transport of aluminum products and raw materials in the Middle East was significantly impacted by disruptions to shipping through the Strait of Hormuz. According to CITIC Securities, on March 12, Qatar's Qatalum aluminum plant (with a nominal annual primary aluminum capacity of 636,000 tons) announced a 40% production halt (260,000 tons/year) due to a natural gas supply cutoff. On March 15, Bahrain's Alba aluminum smelter (with an annual capacity of approximately 1.6 million tons) declared force majeure due to Strait of Hormuz shipping disruptions, reducing output by about 20%, affecting roughly 300,000 tons of annual capacity. Combined, these two incidents have already impacted 560,000 tons of annual capacity, representing 0.7% of global production.
"To date, neither company has officially announced substantial disruptions to their operational capacity," said Zhang Meng, an analyst at AZ China, speaking to reporters. He noted that EGA has two plants in the Middle East, producing around 1.6 million tons of primary aluminum in 2025. A complete stoppage would have a very significant impact, as 1.6 million tons represents over two percentage points of global market share.
From a broader global capacity distribution perspective, the entire Middle East region accounts for nearly 9% of global primary aluminum production capacity, with its exports constituting about 10% of global supply. Guoxin Futures analysis suggests that, while the attacked companies have not yet formally declared substantial operational disruptions, in an extreme scenario, up to 2.8 million tons of primary aluminum capacity in the Middle East could face production halts, representing approximately 3.5% of global aluminum capacity.
CITIC Securities commented that direct attacks on aluminum plants signify a substantial increase in the risk of production disruptions within the Middle East region. Equipment damage could lead to longer-term capacity reductions or shutdowns, having a more profound impact on supply and demand.
In Zhang Meng's view, the market's current focus is on the damage to and potential shutdowns of the relevant enterprises. Subsequent price trends will depend on the final assessment of capacity damage released by these aluminum companies, as well as the impact of the evolving geopolitical situation on market risk appetite and macroeconomic liquidity expectations.
**Exacerbating Aluminum Supply Chain Risks, Institutions Bullish on Aluminum Prices in the Short Term**
The geopolitical conflict has intensified fears of supply chain breakdown and ignited bullish sentiment in capital markets.
Observers noted that LME aluminum futures prices showed strong performance during the month, peaking at $3,546.5 per ton, a nearly four-year high. On March 30, Beijing time, LME aluminum futures prices surged significantly, opening at $3,400 per ton, reaching an intraday high of $3,492 per ton, with a low of $3,400 per ton. In contrast, while Shanghai aluminum prices also moved upward, briefly approaching the high of 26,000 yuan per ton, the overall increase was weaker than that of London aluminum. On the morning of March 30, the main Shanghai aluminum futures contract rose over 3% intraday, with a specific Shanghai aluminum call option contract surging by 160.00%.
Although domestic futures prices were relatively moderate, the A-share aluminum sector experienced a wave of limit-up gains. By the close on March 30, shares such as Tianshan Aluminum, Minfa Aluminum, Changjiang Aluminum, and Ye Chiu Metal Recycling hit the daily upward limit. Shares like Shenhuo Coal and Yunnan Aluminum rose by 9.50% and 4.19% respectively. Huaxi Securities indicated that if announcements of production cuts and shutdowns follow densely, the room for further downside in aluminum prices would be extremely limited, suggesting potential value for attention from a contrarian perspective.
Behind the surge in futures prices lies a sharp increase in global electricity costs per ton of aluminum. Zhongyou Securities pointed out that since the outbreak of the Middle East conflict, natural gas prices have skyrocketed. Calculating based on natural gas prices of 50-60 EUR/MWh, the electricity cost for electrolytic aluminum production in regions reliant on natural gas for power generation has surged to $1,470 - $1,764 per ton, significantly higher than previous levels. It is anticipated that even if the Middle East situation eases somewhat later, as long as the risk premium for shipping through the Strait of Hormuz remains high, the marginal advantage of ultra-low-cost production capacity in the Middle East could be weakened for a considerable period.
Zhongyou Securities further predicted that if the conflict continues, rising natural gas power generation costs coupled with raw material shortages could drive aluminum prices up to 30,000 yuan per ton.
Notably, within this global capacity crisis, Chinese aluminum processing enterprises are experiencing tangible "export benefits." Due to the significantly weaker rise in Shanghai aluminum prices compared to London aluminum prices recently, the average Shanghai-London price ratio for March stood at 7.36 as of March 26, noticeably lower than the 7.86 recorded during the same period last year. This has substantially enhanced the price competitiveness of domestic aluminum sheet, plate, and foil products for export.
Surveys by AZ China show that leading sheet and foil enterprises in Henan province are currently operating at full capacity, with recent export orders increasing by 15% month-on-month. A large enterprise in Shandong province is also running its production lines at full capacity due to the widening domestic-international price gap and the influx of overseas orders. This export order benefit is expected to persist until June 2026.
Simultaneously, the impressive financial performance of listed Chinese aluminum companies has injected confidence into the market. Taking Tianshan Aluminum as an example, its 2025 annual report showed revenues of 29.502 billion yuan and a net profit of 4.818 billion yuan, with plans to distribute cash dividends of 1.147 billion yuan. More encouragingly for the market, the company forecasts a net profit attributable to shareholders of 2.2 billion yuan for the first quarter of 2026, representing a year-on-year increase of over 100%, once again breaking its historical record for quarterly performance.
Looking ahead, the resilience of demand from key industries should not be underestimated. CITIC Securities anticipates that the power grid and automotive sectors will maintain high growth momentum through 2026, thereby supporting sustained demand growth for primary aluminum. The institution expects aluminum prices to reach 23,000 yuan per ton in 2026.
Guoxin Futures also emphasized the need to closely monitor further recovery in the automotive consumer market and its pull on downstream demand. Huaxi Securities believes that as an essential industrial commodity, the decline in aluminum consumption during historical downturns has been only 1%-2%, a much smaller contraction compared to the supply side. If subsequent announcements of production cuts and shutdowns materialize densely, the room for further decline in aluminum prices would be extremely limited.