On February 28 local time, Israel and the United States jointly launched a large-scale military strike on Iran's mainland. Iran retaliated in response, causing the situation in the Middle East to deteriorate. Subsequently, the US commitment to escorting the Persian Gulf and the news that related countries would release oil reserves temporarily lifted market sentiment. However, the situation in the Middle East still remains highly uncertain, which has affected the entire aluminum industry chain to varying degrees.
1. Aluminum ore supply is loose, but ocean freight rates are rising.
In February, China's bauxite output was 4.7567 million tons, a decrease of 10.92% month-on-month and an increase of 6.13% year-on-year. Domestic bauxite supply was sufficient. In terms of imported bauxite, China imported 14.67 million tons in December, a decrease of 2.88% month-on-month and 2.02% year-on-year. The supply of imported bauxite was also loose. However, due to the increase in crude oil prices, ocean freight rates gradually rose.
In terms of new production capacity, the increase in global bauxite supply in 2026 will still mainly come from Guinea. Based on the expected increments from the already operational, resumed, and expanded enterprises in the region, it is estimated that the global bauxite supply will increase by approximately 40 to 50 million tons in 2026. Excluding potential policy disruptions, the bauxite market is expected to remain oversupplied in 2026.
2. Supply pressure of alumina still exists but costs are rising.
In February, China's output of metallurgical grade alumina was 6.6002 million tons, a decrease of 10.63% month-on-month and 0.05% year-on-year. During the month, a large-scale production cut was implemented by a certain enterprise in the northern region, coupled with equipment maintenance and production line upgrades by some enterprises, as well as reduced operating loads by some enterprises in the southern region, resulting in a slight contraction in overall output for the month. In March, some enterprises may continue to carry out maintenance and production line upgrades, and the industry will enter a phased inventory reduction process. However, the newly added capacity in Guangxi will be gradually released, offsetting some of the reduction, and the overall operating capacity is expected to show a slow decline.
In February, the overseas production of metallurgical grade alumina was 4.42 million tons, a decrease of 12.41% month-on-month and 3.66% year-on-year. The production of alumina overseas was relatively stable during the month. On February 28th, the conflict between Iran and Israel escalated, and Tehran, the capital of Iran, was attacked. So far, there have been no reports of alumina plants in the region being shut down. According to SMM statistics, Iran has only one alumina plant, which is equipped with bauxite production capacity. If the geopolitical conflict intensifies further, the production of this plant may be affected, and there is a possibility of reduced output or shutdown. Data shows that Iran's annual alumina production is about 250,000 tons, and its bauxite production is about 650,000 tons. Its alumina production cannot meet the demand of domestic aluminum smelting, and it has long relied on imports. Among them, India is the main source of imports, with alumina from India accounting for 40% to 80% of its total imports.
In terms of new capacity, there will still be a large amount of alumina capacity to be released both domestically and internationally in 2026. It is estimated that the domestic new capacity will be approximately 15 million tons, mainly in Guangxi and Hebei provinces, while the overseas new capacity will be about 7.5 million tons, mainly concentrated in India. The supply side of alumina is under considerable pressure.
In December, China's exports of alumina reached 205,900 tons, a month-on-month increase of 22.56% and a year-on-year increase of 9.35%. Imports of alumina stood at 227,800 tons, a month-on-month decrease of 1.98% and a year-on-year increase of 1,389%. The net import for December was 21,900 tons. In terms of the countries involved in alumina imports and exports, the Middle East accounts for a relatively small proportion.
In terms of inventory, as of March 5th, the total inventory of alumina in China was 5.722 million tons, continuing to increase. The increase mainly came from in-transit inventory and port inventory, with futures inventory rising above 330,000 tons.
III. Disruptions in the Supply of Electrolytic Aluminum Occur
In February, domestic primary aluminum production was 3.46 million tons, up 3.6% year-on-year and down 8.91% month-on-month. Affected by the Spring Festival holiday, the overall operating rate of downstream industries declined, and the proportion of molten aluminum also dropped significantly, decreasing by 7.7 percentage points to 64.4% compared with January. Based on the proportion of molten aluminum, the domestic primary aluminum ingot production in February increased by 25.8% year-on-year and 16.2% month-on-month. As the number of natural days returns to normal in March, the domestic primary aluminum production is expected to rise month-on-month.
In February, overseas electrolytic aluminum production was 2.37 million tons, up 2.5% year-on-year. New electrolytic aluminum projects in Indonesia, Angola and other places continued to ramp up production, and the average daily output overseas increased by 0.9% month-on-month. In March, the operating capacity of new electrolytic aluminum projects in Indonesia and Angola is expected to continue to rise, but the aluminum plant in Mozambique faces the risk of production cuts or shutdowns.
The total electrolytic aluminum production capacity in the Middle East in 2025 was 6.92 million tons, with an actual output of approximately 6.85 million tons, accounting for 9% of the global total supply of aluminum ingots. The total demand for alumina in the Middle East for the entire year of electrolytic aluminum production was about 13.75 million tons, while the internal alumina production capacity in the Middle East was only 4.35 million tons, requiring a large amount of imports to maintain production. The Strait of Hormuz has come to a standstill, and the electrolytic aluminum production capacity is facing the risk of alumina supply disruption. On March 3rd, due to a shortage of natural gas supply from Qatar, the Hydro joint venture, Qatar Aluminum, has begun to orderly shut down its aluminum production lines. Qatar Aluminum's annual primary aluminum production capacity is 636,000 tons, and its casting workshop capacity is 664,000 tons. On March 4th, due to an unexpected force majeure event, Aluminium Bahrain will be affected in fulfilling its supply contracts. It is reported that Aluminium Bahrain's electrolytic aluminum output in 2025 was 1.622 million tons. As of March 4, 2026, the company's electrolytic aluminum production will continue, but due to the blockade of the Strait of Hormuz, the company's aluminum ingots cannot be delivered normally.
In terms of energy sources, large aluminum plants worldwide that mainly generate electricity with natural gas (including LNG) are highly concentrated in the Middle East, followed by a few projects in Europe, South America and Africa. These plants account for approximately 13% of the global total electrolytic aluminum production capacity (about 8 to 9 million tons).
In terms of imports and exports, in December, domestic imports of primary aluminum stood at 189,200 tons, while exports were 37,600 tons, resulting in a net import of 151,600 tons. In 2025, China is expected to import 2.54 million tons of electrolytic aluminum, of which 48,700 tons will be imported from the Middle East, accounting for 1.9% of the total imports.
In terms of new production capacity, domestic electrolytic aluminum is expected to add approximately 550,000 tons of new capacity in 2026. With the capacity ceiling in place, the subsequent increase will also be limited. Judging from the ongoing and planned projects, the overseas electrolytic aluminum capacity increase will be significant in the future, mainly in Indonesia and India. However, due to factors such as aging power systems and political environments, the construction period of overseas electrolytic aluminum projects is relatively long, and capacity release is slow. It is estimated that overseas electrolytic aluminum will add about 1.3 million tons of new capacity in 2026, and around 1 million tons in 2027.
IV. Conclusion
Overall, the situation in the Middle East has not had a significant impact on the global supply of bauxite for the time being. However, from the perspective of freight costs, the continuous rise in ocean freight rates has increased the transportation costs of bauxite, thereby providing support for the domestic import price of bauxite. Regarding alumina, as the Middle East is a net importer of alumina, the halt in transportation has led to an increase in supply from non-Middle Eastern regions. However, with the rise in energy and raw material caustic soda prices, the cost support for alumina has also strengthened. As for electrolytic aluminum, the Middle East is a net exporter of electrolytic aluminum, and the geopolitical situation has had a significant impact on local electrolytic aluminum enterprises. From the perspective of global supply, it has already had a substantial impact on the supply of electrolytic aluminum, and the effect is more pronounced.
