According to a research report from CICC, on March 3rd and 4th, Middle Eastern aluminum producers Qatar Aluminum and Bahrain Aluminum successively declared force majeure. This news has driven a continued rise in LME aluminum prices. The primary reason for Qatar Aluminum's shutdown is the existing threat of disruptions to its natural gas energy supply. Citing safety and operational concerns, the company proactively chose to close its smelter. Given the high risk of energy supply cuts in the Middle East, other aluminum producers may follow Qatar Aluminum's lead and initiate preemptive shutdown preparations.
The aluminum supply-demand deficit is widening, and the U.S.-Iran conflict introduces heightened vulnerability. Coupled with the combined effect of globally accommodative fiscal and monetary policies, aluminum prices are expected to reach new highs. Considering low costs, per-ton aluminum profits are anticipated to expand further. CICC's main views are as follows:
Event: On March 3-4, Middle Eastern aluminum producers Qatar Aluminum (annual capacity 636,000 tons) and Bahrain Aluminum (annual capacity 1.62 million tons), which account for 0.8% and 2.0% of global production respectively, declared force majeure. Influenced by this news, LME aluminum prices climbed continuously, rising 2.5% on March 3rd and surging up to 5% during the night session on March 4th to touch $3,418 per ton, hitting a new high since 2022.
If the U.S.-Iran conflict persists, its impact on the Middle Eastern aluminum industry chain and the global aluminum supply chain could intensify. First, production safety risks may expand the scope of regional shutdowns. Middle Eastern aluminum smelting relies on natural gas for power. If pipelines are attacked leading to energy disruption, smelters face the risk of emergency shutdowns. This can cause unstable power supply, increasing the risk of accidents like short circuits, and emergency stops entail high recovery costs and long downtime. The core reason for Qatar Aluminum's shutdown was the threat to its gas supply, prompting a proactive closure for safety. Other smelters in the region, facing similar high risks, might initiate preemptive shutdowns.
Second, a closure of the Strait of Hormuz would disrupt both raw material imports and product exports. According to CRU, the Middle East has an aluminum smelting capacity of 7.05 million tons (2025), representing 9% of global output. The Strait of Hormuz is the key maritime route for exports; its closure would prevent regional products from reaching global markets. Regarding raw materials, the region's alumina capacity is 4.55 million tons, with an external dependency of 68%. Given that smelters typically hold about one month of raw material inventory, the likelihood of production cuts and shutdowns in the region increases significantly if the strait remains closed.
Third, disruptions to LNG transport could trigger a spike in European natural gas prices, posing shutdown risks for European aluminum smelters. QatarEnergy's LNG supply accounts for roughly 20% of the global market. Production was forced to halt after an attack on March 2nd, causing the European benchmark gas price to surge a cumulative 60% over two days. With gas accounting for about 16% of Europe's power generation, prolonged energy disruptions could lead to supply shortages, potentially forcing aluminum smelters to shut down.
CICC is bullish on aluminum prices and sees a re-rating opportunity driven by expanding per-ton profits. The widening supply-demand gap, increased vulnerability from the U.S.-Iran conflict, and global policy stimulus are expected to push aluminum prices to new highs. With costs remaining low, per-ton profits are forecast to widen further. Considering rising energy and alumina prices, focus is recommended on companies with high self-sufficiency in power and alumina. Recommendations include NANSHAN AL INTL (02610), CHINAHONGQIAO (01378), Aluminum Corporation of China (601600.SH), Tianshan Aluminum (002532.SZ), Nanshan Aluminum (600219.SH), and Huatong Wire & Cable (605196.SH).
Risk factors include significant fluctuations in aluminum prices and changes in the Middle East situation.