Gulf tensions affect alumina supply chains and trade, with China emerging as a crucial raw material importer

The geopolitical tension involving Iran has disrupted alumina markets, not only by limiting exports through the Strait of Hormuz but also by restricting the inflow of raw materials into the Gulf region, thereby tightening supply chains and raising operational risks for smelters dependent on imported alumina. 

Aluminium smelters in the Gulf depend heavily on imported alumina, the intermediate product between bauxite and aluminium. The region has six smelters but only two alumina refineries. One of them, operated by Emirates Global Aluminium at Al Taweelah, has been damaged, forcing shutdowns. Other smelters are running at reduced capacity.

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Now, disrupted demand from the Gulf has added pressure to an already oversupplied alumina market. Cargoes originally meant for the region are being redirected to global markets. Over time, however, reduced alumina supply to smelters could lead to further cuts in aluminium production.

Alumina prices were low before the conflict started. The London Metal Exchange price holds at about 300 dollars per tonne this year, down from over 800 dollars in 2024. More output from China and Indonesia caused an extra supply. Macquarie Bank forecasts a 2.2 million tonne surplus worldwide in 2026, more than before, because of shifted deliveries.

Also read: Q2 2026 sees oversupply weighing on FOB Australia alumina prices

Supply risks are rising for Gulf producers. Qatalum and Aluminium Bahrain have already reduced output. Saudi Arabia’s Ma'aden remains the only fully integrated producer in the region and has been supplying alumina to others.

Another challenge is coal tar pitch, a key material for smelting. Unlike other inputs, it requires heated storage and transport, making supply disruptions harder to manage.

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China has benefited from the situation. It imported 338,315 tonnes of alumina in March, the highest since January 2024. Strong aluminium prices have supported margins for Chinese smelters. 

According to the International Aluminium Institute, Western production fell by 312,000 tonnes in March, while China’s output increased by 88,000 tonnes. China’s share of global production rose to 60.2 per cent and may continue to grow if disruptions persist.