On February 28th, the United States and Israel jointly launched a military strike against Iran. Immediately, Iran retaliated with missiles, marking the entry of the geopolitical confrontation in the Middle East into a stage of substantive military conflict. Especially with the death of Iran's Supreme Leader Ayatollah Ali Khamenei, Iran announced the closure of the Strait of Hormuz. We will not elaborate too much on the political developments here, but rather discuss a few issues that the market is concerned about and their possible impacts on the aluminum market.
It is said online that all 800,000 tons of electrolytic aluminum production capacity in Iran has been shut down.
As of the publication of this article (Beijing time on March 2nd), according to the statistics from Aizhao Consulting, Iran's current electrolytic aluminum production capacity is 793,000 tons, with the operational capacity at around 610,000 tons (based on the operational capacity, it accounts for approximately 0.82% of the global total). Most enterprises are still operating at normal levels, but a few have implemented a "preventive" capacity reduction of 5-80,000 tons (not due to direct bombing of power facilities, but an active choice based on the current situation. The US and Israel's bombings mainly targeted Tehran and Iranian military facilities. The Iralco aluminum plant closest to Tehran is about 300 kilometers away. Due to the rapid changes in the situation, this data can only be presented in an interval format). All of them are making preparations for further reduction and shutdown. After communicating with several Iranian suppliers, the author has summarized that currently, Iran's maritime transportation has come to a standstill, and some land routes are theoretically feasible, but no one dares to take the risk. Therefore, the author believes that the probability of further reduction and shutdown of Iran's electrolytic aluminum production will be extremely high, and close attention is required.
2. Have other electrolytic aluminum enterprises in the Middle East also been affected?
As of the time of this article's publication (Beijing time on March 2nd), according to the statistics from AiZuo Consulting, the electrolytic aluminum production capacity in the Middle East (excluding Iran) is 607.3 million tons, with the operational capacity being 592.3 million tons (based on operational capacity, it accounts for 8% of the global total). The enterprises are still maintaining the pre-war production levels and have not been affected yet. However, it should be noted that Iran has launched counter-bombing attacks on the US military bases in Qatar, Kuwait, the United Arab Emirates, and Bahrain. Apart from Kuwait, all the aforementioned regions have electrolytic aluminum production facilities. The current operational capacity totals 327.5 million tons. Although Saudi Arabia has a production capacity of 79 million tons, there has been no news of military strikes yet.
3. Raw material supply issue
According to the statistics from Aizhe Consulting, the current total production capacity of alumina in the Middle East is 4.55 million tons, with the operational capacity being 4.35 million tons. Among them, 250,000 tons are located in Iran, 2.3 million tons in the United Arab Emirates, and 1.8 million tons in Saudi Arabia (based on operational capacity). Although Iran can be self-sufficient in bauxite, the only 250,000 tons of alumina production capacity is largely insignificant under the current circumstances, and the country has not established sufficient strategic alumina reserves. Most aluminum plants only maintain a regular usage of 2-4 weeks. The available days of alumina inventory in aluminum plants in other regions of the Middle East are also basically maintained at around 1 month or less. The self-sufficiency rates are as follows: 45% in the United Arab Emirates, 118% in Saudi Arabia, 0 in Bahrain, 0 in Oman, and 0 in Qatar. Additionally, Saudi Arabia has abundant bauxite resources, and its alumina plants only need a small amount of imports. In extreme cases, it can also be self-sufficient. However, the bauxite resources needed by the United Arab Emirates need to be transported through the Strait of Hormuz. Comprehensive assessment shows that the blockade of the Strait of Hormuz by Iran will result in the interruption of about 80-90% of raw material and product transportation.
In summary, in the short term, Iranian electrolytic aluminum enterprises are facing the dual threats of raw material supply disruption and direct military actions, and the probability of further production suspension is extremely high. In the medium to long term, depending on the duration of the conflict between the United States and Iran, if it lasts for more than one month, aluminum plants in other regions of the Middle East except Saudi Arabia will definitely be affected and may reduce production. If it lasts for 2-3 weeks, the impact will be relatively limited.
