CITIC SEC has released a research report stating that on March 28-29, aluminum plants owned by EGA and Alba were successively attacked, impacting a combined capacity of 3.1 million tons per year, with the full extent of the effects still unclear. Following a previous production cut of 560,000 tons per year, supply disruption risks in the Middle East region continue to escalate. Disruption risks stemming from rising energy costs in Europe also warrant attention. The medium to long-term supply and demand dynamics for the aluminum industry remain robust, and the emergence of supply disruptions may drive prices to rise beyond expectations, maintaining a positive outlook on investment opportunities in the aluminum sector. The main views of CITIC SEC are as follows:
Attacks on aluminum plants in the Middle East involve 3.1 million tons of capacity, with specific impacts yet to be determined. According to Reuters, on March 28, EGA reported that its Al Taweelah production base in the UAE suffered significant damage from Iranian missile and drone attacks, and an assessment of the facility damage is currently underway. On March 29, Alba confirmed that its facilities were attacked by Iran the previous day and is also evaluating the damage. Reports indicate that Iran stated the attacks on Alba and EGA were in response to earlier attacks on two Iranian steel plants, alleging connections between the two companies and US military-industrial and aviation enterprises. Based on company announcements, the Al Taweelah and Alba plants have capacities of 1.5 million tons and 1.6 million tons per year, respectively, together accounting for 4% of global capacity. The specific impact of the current incidents remains uncertain.
Supply disruption risks in the Middle East have significantly increased since the previous 560,000 tpy production cut. According to ALD and SMM, Middle East primary aluminum capacity is approximately 6.92 million tpy in 2025, representing 9% of global capacity. Previously, affected by energy supply and alumina supply disruptions, Qatalum announced on March 12 the shutdown of 40% of its capacity (260,000 tpy). On March 15, Alba announced production cuts across three production lines due to raw material supply issues, affecting 19% of its capacity (300,000 tpy). These incidents collectively impacted 560,000 tpy of capacity, accounting for 0.7% of the global total. EGA was reportedly planning to reroute aluminum exports and raw material imports via the Sohar port in Oman. The direct attacks on the plants signify a substantial further increase in production disruption risks in the Middle East region. Furthermore, damage to plant equipment could lead to longer-term capacity reductions or shutdowns, having a more profound impact on supply and demand.
Signs of rising energy prices in Europe have emerged, and the associated disruption risks deserve attention. According to EMBER, European gas-fired power generation costs are expected to reach €135 per MWh in April, with current spot generation costs already at €150 per MWh, an 80% increase compared to pre-war levels, although the rise in wholesale electricity prices remains limited so far. Analysis indicates that if wholesale electricity prices subsequently reach €140 per MWh, theoretical profits for European primary aluminum capacity would approach breakeven. Recalling the 2021-22 energy crisis, European capacity began shutting down when profits fell to -$1,000 per ton. If electricity prices reach levels around €200 per MWh, over 1 million tons of European primary aluminum capacity would also face significant disruption risk.
The gradual advancement of Guinea's bauxite quota policy may drive bauxite and alumina prices to stabilize and recover. According to a March 19 Sina Finance report, Guinea's Minister of Mines stated that the country will reduce its bauxite export volume to support prices and protect smaller producers. According to Mysteel, as of March 24, influenced by rising freight costs and quota expectations, Guinea bauxite prices had reached $67 per ton, an increase of 11.7% from the low point. It is anticipated that bauxite prices may subsequently return to above $70 per ton, corresponding to a cost of over ¥2,800 per ton for domestic advantaged imported ore-based alumina capacity, which could support alumina prices in stabilizing or even rising.
Risk factors include: the risk of intensified global trade disputes; the risk of overseas primary aluminum capacity commissioning exceeding expectations; the risk of primary aluminum downstream demand growth falling short of expectations; the risk of a significant rise in global energy costs; the risk of supply disruptions for mining raw materials; the risk of Chinese aluminum companies' dividend payout ratios increasing less than expected; and the risk of further deterioration in the geopolitical situation.
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