The conflict in the Middle East has led to the announcement of production cuts by two major smelters in the region, causing metal and electricity prices to soar by double digits and putting pressure on European aluminum producers and users, prompting their industry representative associations to push for greater European autonomy in aluminum resources. The European Aluminium Association told Platts under the S&P Global Energy umbrella that the EU, due to its own insufficient aluminum production to meet the growing demand, is highly dependent on supplies from the Persian Gulf region. The annual output of aluminum in the Gulf Cooperation Council is 6.8 million tons, accounting for 23% of the original aluminum production outside China and is one of the largest aluminum exporting regions in the world, and also an important source of aluminum supply for Europe.
The EU mainly relies on the Gulf Cooperation Council for primary aluminum ingots. According to the association, in 2025, Europe will import 1.4 million tons of aluminum from the Persian Gulf region, accounting for 14% of its total aluminum imports. Among them, aluminum ingots will account for 86%, followed by wire rods, plates and scrap aluminum.
The industry association stated that the downstream industries in Europe (such as automobiles, construction, packaging, cables and engineering applications, etc.) rely on primary aluminum as a key raw material. These industries are most vulnerable to the increase in aluminum prices and supply shortages, and will be the first to feel the impact of rising manufacturing costs.
The spot price of aluminum on the London Metal Exchange (LME) rose by 11% from February 27th (the day before the war broke out) to March 12th, reaching $3,516 per ton, a four-year high. Affected by the uncertainty and risk sentiment brought about by the conflict in the Middle East, the increase in the physical aluminum premium in Europe (quoted above the LME benchmark price) was even greater. On March 12th, the tax-inclusive aluminum price premium at the Rotterdam warehouse as assessed by Platts was $490 per ton, up 28% from February 27th.
In addition to primary aluminium, the EU also purchases certain special aluminium products from the Persian Gulf region. This region is also the source of approximately 6% of the EU's recycled aluminium imports.
Kelly Roegies, a spokesperson for the European Aluminium Association, told Platts: "The supply of recycled aluminium in Europe has already been a concern within the industry. If there are any further disruptions, the supply will become even more strained." She emphasized that, given the current situation, preventing the export of European recycled aluminium becomes extremely crucial.
Furthermore, the conflicts and partial disruptions in shipping through the Strait of Hormuz have also driven up energy prices. Currently, energy prices in Europe are three times higher than those in other competing regions.
"For energy-intensive industries like the aluminium sector, fluctuations in electricity prices have a direct and significant impact on production costs," Roegies pointed out. From February 28th to the beginning of March, the price of natural gas in Europe (the main driver of electricity costs) had risen from 30 euros per megawatt-hour (34.40 US dollars) to 46 euros per megawatt-hour, an increase of over 50%. As the price of natural gas typically determines the electricity prices in Europe, the average wholesale electricity prices in the main EU markets have also risen by 20% to 30%, currently ranging from 80 to 120 euros per megawatt-hour.
"At this stage, it is too early to make a clear prediction of the overall impact of this event on European industry. Moreover, detailed data on shipping traffic and trade disruptions usually takes some time to be available, which means that the full picture of any supply impact is currently unclear," Roegies said. He also added that the situation in the Middle East remains highly unstable, and the development of the situation in the coming weeks will largely determine the extent and duration of production or shipping route disruptions in the region.
However, Roegies pointed out that this external supply shock and the renewed emergence of geopolitical tensions have once again highlighted the strategic need for Europe to maintain its autonomy in the aluminum sector, namely to ensure that its domestic aluminum production is resilient and competitive, especially considering the importance of aluminum in energy transition technologies, transportation, and defense.
