This text is an automatic translation from Русский. It was generated by AI and may contain inaccuracies.
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This text is an automatic translation from Русский. It was generated by AI and may contain inaccuracies.
Read original →Aluminum has surged to $3,300 per ton amid the Strait of Hormuz blockade. How the Middle East conflict is impacting the global metal market, why Europe is in crisis, and what Russia stands to gain from rising prices.
Aluminum prices on the London Metal Exchange reached their highest level since 2022 — around $3,300 per ton — due to escalating conflict in the Middle East. Supply disruptions from Persian Gulf countries, which account for 9% of global capacity, have paralyzed shipping through the Strait of Hormuz and caused shortages against the backdrop of an already tight market. The situation is being exacerbated by rising energy prices, reduced production in Europe, and China's limited ability to offset the deficit.
Aluminum is one of the key metals of the modern economy. It's widely used in construction, transportation, aviation, energy, and more. The energy transition is providing additional momentum to demand: the metal is actively employed in the production of electric vehicles, solar panels, and power transmission lines.
At the same time, the market for this metal remains extremely sensitive to external shocks. Aluminum production requires substantial volumes of electricity, and international supply chains are closely tied to maritime logistics. As a result, any disruptions in energy or transportation routes quickly impact the metal's price.
Against this backdrop, the escalating conflict in the Middle East has become a serious risk factor for the market. In early March 2026, aluminum on the London Metal Exchange rose to approximately $3,300 per ton, reaching its highest level since 2022. The price increase is directly linked to supply disruptions from Persian Gulf countries—one of the world's most important centers for aluminum production and export.
The first aluminum plants in the Persian Gulf countries appeared back in the 1970s. At that time, amid the oil crises, regional governments began seeking ways to diversify their economies and invested part of their oil revenues in energy-intensive industries. It was during this period that the first aluminum facilities were built in the UAE and Bahrain.
However, the real growth of the industry began in the early 2000s. Over the following two decades, Middle Eastern countries transformed into one of the key centers of the global aluminum industry.
The main driver of this development was production economics. Smelting primary aluminum requires enormous volumes of electricity: energy costs account for roughly 30–40% of the metal's production cost. That's why aluminum plants are traditionally located in regions with access to cheap energy.
The Persian Gulf countries were able to offer precisely such conditions. Thanks to access to relatively cheap natural gas and large-scale government investment, the region built modern metallurgical complexes, many of which today rank among the world's largest.
The region's countries account for approximately 9% of global aluminum production capacity, making the Persian Gulf the largest center of metal production outside China. Key companies—Emirates Global Aluminium and Aluminium Bahrain (Alba)—supply products to markets in Europe, Asia, and North America.
However, such a high concentration of production in one region has a downside: any geopolitical or logistical problems in the Middle East can quickly destabilize the global aluminum market.
The key problem is logistics. Virtually all aluminum exports from Persian Gulf countries pass through the Strait of Hormuz—one of the world's most critical maritime trade routes. Aluminum reaches external markets through this strait, while bauxite and alumina needed for production are delivered to plants the same way.
That's precisely why the escalating conflict around Iran has so quickly impacted the aluminum market. Shipping through the strait is now effectively paralyzed: most commercial vessels are avoiding passage through this route following a series of attacks. Insurance premiums for voyages to the Persian Gulf have surged, and some insurers have temporarily refused to cover such shipments.
Against this backdrop, Donald Trump announced measures to support shipping: the U.S. is prepared to provide insurance for maritime transport through the Persian Gulf at reasonable rates, and if necessary, the country's Navy can escort commercial vessels and tankers through the Strait of Hormuz. However, such measures can only partially reduce risks—they don't eliminate the threat of attacks or guarantee a return to normal logistics.
The situation worsened after the region's largest producer—Alba—declared force majeure on some contracts, warning clients of possible delivery delays.
The geopolitical crisis in the Middle East has intensified an already strained situation in the global aluminum market.
First, the industry has been facing supply constraints for several years now. After the energy crisis, more than half of Europe's aluminum facilities cut production. High electricity prices made operating a number of plants economically unviable—capacity was reduced in Germany, the Netherlands, Slovakia, and Romania, among others. As a result, the European market has become significantly more dependent on metal imports.
Second, rising tensions in the Middle East have already driven up oil and gas prices. As of March 6, 2026, Brent crude was approaching $90/barrel (+45% since the start of the year), while gas prices in Europe on the ICE exchange reached $785 per thousand cubic meters—a record level since January 2023. Since aluminum production directly depends on electricity costs, more expensive energy automatically increases the metal's production costs.
China plays a distinct role—it's the world's largest aluminum producer, accounting for roughly 60% of global metal output. However, the country's ability to further expand production is limited by a capacity ceiling imposed by authorities—around 45 million tons per year. These restrictions were introduced to reduce emissions and prevent overproduction, but now China cannot quickly compensate for potential supply disruptions from other regions.
Finally, market participants' expectations are creating additional pressure. Fearing supply disruptions, companies are seeking to increase strategic aluminum reserves, which also supports price growth. Meanwhile, metal inventories in recent years have remained at relatively low levels, making the market more sensitive to any news about potential supply disruptions.
Against this backdrop, Russia's position is of particular interest. The country has traditionally ranked among the world's largest aluminum producers: with output of 3.8 million tons per year (roughly 5–6% of global production), Russia trails only China and India. The main producer is Rusal, which ranks among the world's largest aluminum companies.
Unlike many competitors, Russian enterprises rely predominantly on hydropower. Most aluminum plants are located in Siberia and receive electricity from hydroelectric stations. This reduces the carbon footprint of production and makes Russian metal cost-competitive.
After 2022, Russia's aluminum industry faced mounting sanctions pressure. The United States and United Kingdom banned imports of new shipments of Russian aluminum and restricted its trading on their exchanges. The European Union has also gradually tightened restrictions, including a ban on some supplies of processed aluminum from Russia (wire, foil, and pipes), followed by a ban on imports of primary aluminum. As a result, the share of Russian metal in EU imports fell from approximately 16% in 2021 to 5% by 2024, forcing producers to more actively redirect exports toward Asian markets.
The Middle East crisis creates more of a pricing opportunity for Russia than a strategic breakthrough. Rising global prices increase producers' export revenues and partially offset the constraints of recent years. Even without increasing supply volumes, higher metal prices improve the industry's financial performance, particularly for Rusal. Moreover, if supply disruptions from Persian Gulf countries persist, some demand may temporarily shift toward alternative producers, including Russia.
However, the potential for such gains is limited. Russia's aluminum industry has already adapted to new trade conditions and has largely redirected exports to Asian markets. Opportunities for rapidly scaling up production are also modest, while sanctions restrictions continue to affect trade patterns. Therefore, the current price spike is more likely to strengthen Russian companies' positions in the current market configuration than lead to a notable increase in Russia's share of the global aluminum industry.