The aluminum industry in the Gulf countries has been significantly affected during March, recording a 6% decline in production, according to data from the International Aluminum Institute. This drop is attributed to the ongoing repercussions of the war between the United States and Iran, alongside disruptions in supply chains, particularly following the closure of the Strait of Hormuz.
The average daily aluminum production in the Gulf was approximately 15,963 tons in March, compared to 16,997 tons in February. Difficulties in securing raw materials such as bauxite and alumina contributed to this decline, due to supply chain disruptions.
Event Details
Reports indicate that several smelters in the region reduced their production after their facilities were subjected to energy or infrastructure attacks. Additionally, some factories resorted to depleting their inventories due to the disruption in the flow of raw materials, exacerbating the crisis.
The closure of the Strait of Hormuz, a vital point for transporting supplies, significantly impacted global supply chains, with repercussions reaching countries like Australia, a major supplier of alumina. The institute clarified that restarting production lines could take weeks or even months, especially if facilities sustained damage.
Background & Context
Globally, primary aluminum production reached around 6.3 million tons in March, with a daily average of 203.3 thousand tons, marking a slight annual growth of 0.94%, despite a decline in daily production compared to the previous month. China led global production with a share of 60.2%, followed by Europe at 9.9%, and the Gulf countries at 7.9%.
This distribution highlights the importance of the Gulf region in the aluminum market, despite current challenges. Gulf production accounts for about 9% of global production capacity and represents approximately 15% of the European Union's imports and 20% of the United States' imports, enhancing the impact of any production disruptions on international markets.
Impact & Consequences
Reports suggest that Gulf countries' aluminum exports will constitute about 21% of the United States' primary aluminum imports by 2025, and 16% of its flat product imports. Gulf exports also account for 19% of the European Union's primary aluminum imports, with a particular focus on Italy and the Netherlands, and nearly 25% of Japan's primary aluminum imports.
These figures indicate the strategic importance of Gulf countries in the global aluminum market, where any production decline could significantly impact global prices.
Regional Significance
Arab countries are directly affected by these changes in aluminum production, as many rely on importing aluminum from the Gulf. Thus, any price increase or supply shortage could impact local industries.
In conclusion, the decline in aluminum production in the Gulf underscores the importance of a swift response to the challenges facing the industry, to ensure stability in both local and global markets.