The Strait of Hormuz closure has created a rare double bind for Gulf aluminium producers: they cannot ship finished metal out, and they cannot reliably bring alumina feedstock in. With Alba under force majeure, Qatalum running at 60% capacity, and EGA's Al Taweelah refinery having lost nearly half its output in the first half of 2026, analysts now project a global supply deficit of up to 3.5 million tonnes this year, and prices have already hit four-year highs with Citi projecting a potential climb to $4,000 per tonne.
Introduction
When a critical shipping lane closes, the immediate instinct is to think about exports: finished goods that cannot reach their markets. What is happening to Gulf aluminium producers right now is more complicated and, for global buyers, considerably more alarming. The Strait of Hormuz closure has created a two-directional squeeze. Gulf smelters cannot move finished metal out, but they also cannot reliably bring the raw material they need to keep producing in.
This matters because the Gulf is not a marginal player in global aluminium supply. The UAE, Bahrain, Saudi Arabia, Qatar, and Oman together produced around 6.16 million tonnes of primary aluminium in 2025, according to the International Aluminium Institute. That figure represents roughly 8 to 9% of global output, but a far larger share of seaborne trade. More than 80% of Gulf production is exported, and around 5.14 million tonnes of that metal transited the Strait of Hormuz in a typical year, reaching buyers across Europe, Asia, and North America.
The disruption also comes at a moment when the aluminium market had almost no cushion to absorb a shock. LME warehouse stocks were already falling heading into 2026, dropping below 300,000 tonnes by mid-year. When geopolitical events collide with depleted buffers, price signals tend to be severe. They have been: LME three-month aluminium reached a four-year high, and the most bullish bank forecasts now point toward $4,000 per tonne before year-end.
Two Smelters, Two Crises: Alba and Qatalum
The most visible single casualty of the Hormuz disruption is Aluminium Bahrain, universally known as Alba. The smelter is the largest outside China, producing a record 1.623 million tonnes of aluminium in 2025. When commercial shipping through the Strait effectively ceased following the February 28 strikes and Iran's subsequent closure announcement, Alba found itself producing metal it could not ship.
In March, Alba declared force majeure on its aluminium deliveries. The company was explicit that the smelter itself remained physically intact; the problem was logistics, not production. As an Alba spokesperson put it: "We are not able to ship. So we're producing, but the metal is here in Alba." The company simultaneously shut down three smelting lines representing 19% of its total capacity, a controlled decision to preserve raw material stocks rather than accumulate unsaleable inventory. Alba said it was exploring overland trucking routes through Saudi Arabia to Red Sea ports, and to Omani ports including Sohar and Salalah. One trader close to the company estimated that even at reduced utilisation, the logistics operation would require somewhere between 100 and 150 trucks per day.
Qatalum, the 648,000-tonne-per-year joint venture between Norsk Hydro and Qatar Aluminium Manufacturing Company, faced a different but equally serious problem. In early March, gas supplier QatarEnergy warned it would suspend natural gas deliveries entirely, citing damage to regional energy infrastructure. Iranian missiles subsequently struck Ras Laffan on March 18 and 19, damaging two LNG production trains and knocking out roughly 17% of Qatar's LNG export capacity. Qatalum initiated a controlled shutdown before later receiving confirmation that gas supply would resume at reduced levels sufficient to sustain roughly 60% of production. Norsk Hydro issued a force majeure notice to Qatalum's customers and has since been navigating a second, separate dispute after Qatalum terminated the marketing agreement that allowed Hydro to sell the joint venture's output commercially.
The Feedstock Problem: Why the Squeeze Runs in Both Directions
To understand why this crisis is structurally different from a simple export blockage, it helps to know something about how aluminium is made. The metal is not produced directly from bauxite ore. Bauxite is first refined into an intermediate product called alumina, a white powder that then feeds the smelting process. Gulf producers sit on no significant domestic bauxite reserves. They import alumina, and a meaningful portion of that material historically travelled through the Strait of Hormuz.
Wood Mackenzie has estimated that Hormuz disruptions could sever up to 60% of alumina supply reaching Middle Eastern smelters. That figure is the mechanism that transforms a shipping disruption into a production crisis: even a smelter that is physically undamaged and has full power supply cannot run without feedstock. Most Gulf smelters maintain only three to four weeks of alumina inventory at any given time. Once that buffer runs out, curtailments stop being a management choice and become a physical necessity.
This dynamic played out most severely at Emirates Global Aluminium's Al Taweelah complex in Abu Dhabi. Iranian missiles struck the Khalifa Economic Zone on March 28, causing severe structural damage to the alumina refinery that feeds the smelter and forcing potline shutdowns. The numbers are stark: EGA's Al Taweelah refinery produced 602,000 tonnes of alumina in the first half of 2026, compared with 1.14 million tonnes in the same period of 2025. That is a year-on-year decline of approximately 47%. Total aluminium sales fell 32% to 939,000 tonnes in H1 2026. The estimated production loss from the outage alone is roughly 700,000 tonnes of alumina, a figure with real implications for EGA's own sourcing costs and for the wider spot market.
As of mid-September, EGA's Al Taweelah smelter is operating at around 18% of its pre-war capacity. The company has announced that around 25% of smelter capacity had been restarted as of late August, with full restoration to pre-war levels now targeted for the first quarter of 2027. The capital expenditure required for that restoration is estimated at approximately AED 1.5 billion (around $400 million). Alumina imports are now being routed through Sohar in Oman, requiring coordinated overland transport to Abu Dhabi and Dubai facilities, which adds both cost and complexity to every tonne of production.
The Price Signal: From LME Highs to Record Physical Premiums
Commodity markets respond to supply disruptions through price, and the aluminium market's response to the Hormuz crisis has been unambiguous. LME three-month aluminium climbed to $3,449.50 per tonne in early March, a four-year high at the time, as Alba's force majeure declaration removed ambiguity about whether the disruption was a short-term risk or a realised supply event. Prices continued pushing higher through the spring, reaching $3,768 per tonne by mid-May. The direction of travel is clear even if the eventual ceiling is not.
The LME benchmark, however, tells only part of the story. Physical premiums, the surcharges buyers pay over the benchmark to secure actual metal for delivery, have moved in ways that more directly reflect the supply squeeze facing real industrial buyers. In Europe, the duty-paid Rotterdam premium surged from around $335 per tonne in January to a record $472 per tonne by late March, before climbing toward roughly $600 per tonne in May. That translates into a cost increase of 17 to 18% for European buyers in just a few months. Billet premiums, relevant for manufacturers of construction profiles, automotive components, and packaging, moved even more sharply, with Rotterdam aluminium billet premiums surging to over $1,100 per tonne above the LME base price.
In the United States, the picture is complicated by the 50% import tariff already in place. The US Midwest premium broke $2,000 per tonne for the first time in January 2026 and has since traded above $2,400, meaning the all-in delivered cost to a US manufacturer regularly exceeds $5,500 per tonne. Japanese buyers saw quarterly contract premiums hit an eleven-year high of $350 per tonne. The convergence of elevated LME prices and record physical premiums across three major markets simultaneously is a reasonable measure of how broad-based the supply concern has become.
Analysts are split on how far prices can go if disruptions persist. Citi is the most bullish, explicitly describing the current setup as the most bullish environment for aluminium in over fifty years and projecting an H2 2026 average of $4,000 per tonne. The bank cites inventories at 55-year lows, near-zero spare capacity outside of China, and a projected 2.7 million tonne global supply deficit. TD Securities has pencilled in a deficit of 1.9 million tonnes and expects prices and US Midwest premiums to remain elevated. Goldman Sachs raised its H1 base case to $3,150 per tonne and noted that a one-month halt to Gulf production alone could push prices to $3,600. UBS raised its 2026 price forecast by 13% to $3,250 per tonne. The common thread across all of these forecasts is that even the more cautious institutions see the disruption as having permanently repriced the near-term floor for aluminium.
Global Output Losses and the Structural Context
Building on my analysis of the supply chain's structural midstream fragility in September, the aluminium crisis illustrates a pattern that has appeared repeatedly in 2026: geographic concentration so deep that a single chokepoint can destabilise multiple supply chains simultaneously. The IAI reported that average daily Gulf aluminium production fell 26.7% in April versus the prior year, reaching just 10,989 tonnes per day. By July, Gulf production had plunged 44% year-on-year to 293,000 tonnes for the month. Wood Mackenzie estimates that industry-wide output losses in the region could reach 3 to 3.5 million tonnes across 2026, equivalent to roughly 5% of global primary supply.
The global picture is made more complicated by China, which produced approximately 45 million tonnes in 2025, accounting for over 60% of world output, but is expected to see production stall in 2026 as it approaches the government-imposed cap of 45 million tonnes. Expansion capacity outside China, particularly in Indonesia, is facing higher energy costs and regulatory delays. In other words, the two most obvious potential sources of offsetting supply, China and new capacity elsewhere, are both constrained. The market entered 2026 without meaningful slack, and the Hormuz disruption has removed supply that cannot easily be replaced from other sources on any near-term timeline.
Government responses on both sides of the Atlantic reflect a recognition that this is no longer a question of commodity market volatility but of industrial security. The United States announced the Vault Project, a $10 billion Strategic Critical Minerals Reserve explicitly modelled after the Strategic Petroleum Reserve, intended to stockpile aluminium and other materials against exactly the kind of maritime chokepoint failure now playing out in the Gulf. The European Union, under its RESourceEU Action Plan, implemented an emergency ban on aluminium scrap exports to non-OECD countries, aimed at keeping recycling furnaces fed as primary supply tightens.
Logistics, Insurance, and the Cost of Rerouting
For producers who can still ship, the question is how. War-risk insurance premiums have spiked sharply, and while marine underwriters at Lloyd's have maintained that coverage remains technically available, the practical effect has been a near-halt in large-vessel crossings on the main safe-transit corridor through the Strait. Port infrastructure at facilities like Jebel Ali, Abu Dhabi, and Salman Port in Bahrain is built around bulk aluminium shipments of 40,000 to 60,000 tonnes per vessel. Those economies of scale vanish the moment you shift to overland trucking or rerouted smaller vessels.
EGA has made the most progress in establishing alternative routes, rerouting exports through ports outside the Strait and coordinating inbound alumina deliveries through Sohar in Oman. EGA's Jebel Ali site, which did not suffer the same physical damage as Al Taweelah, has continued production at full capacity with alternative outbound logistics in place. Alba is working through the overland trucking option, and there is a certain operational poetry in the image of 100-plus trucks per day hauling one of the world's largest smelters' output across the Arabian Peninsula to reach the nearest viable port.
These workarounds are real, and they deserve credit as evidence of operational flexibility. But they come with a cost structure that is materially different from the one these facilities were designed around. Elevated aluminium prices are currently providing enough margin for Gulf smelters to absorb the additional freight and logistics burden without existential financial stress. As the AL Circle noted, EGA and Alba remain among the lowest-cost, most efficient integrated producers in the world, and their ability to restart damaged capacity in months rather than years is itself evidence of resilience. The harder question is what happens to that cost structure if prices soften before the Strait reopens.
What Comes Next
The most important near-term variable is the Strait itself. A brief reopening under the June US-Iran agreement broke down in early July after further attacks on commercial vessels, and as of the end of July the waterway remains effectively closed to routine commercial shipping. EGA has stated that full restoration of Al Taweelah may take up to a year from when repairs began, meaning that even under an optimistic diplomatic scenario, a significant portion of the Gulf's aluminium capacity remains offline for most of the remainder of 2026.
The restart trajectory at individual facilities provides some signal. EGA restarted its first restored cell in late May and had 89 cells back online by late August, with the company now targeting a return to pre-war capacity in the first quarter of 2027. Alba's shut potlines remain structurally intact and can be restarted through standard electrical preheating procedures once shipping normalises; the company expects a relatively quick restart when conditions allow. Qatalum at 60% capacity is a more stable situation than the full shutdown feared in March, but the ongoing commercial dispute between Norsk Hydro and Qatalum over the marketing agreement adds a layer of uncertainty that has nothing to do with the Strait.
For buyers, the central lesson from the first half of 2026 is that single-strait dependence for a critical industrial input is a procurement risk that had not been properly priced. As one analyst put it, the question procurement teams are now obliged to ask, one that was not part of the standard checklist five years ago, is how much of their supply is concentrated behind a single waterway. The policy responses now being drafted in Washington and Brussels, reserves, scrap export controls, supply chain mapping requirements, are early attempts to institutionalise that question. How effectively those measures translate into actual diversification will be the story to watch well beyond 2026.