Adding fuel to the fire of aluminum prices! Bahrain Aluminum begins phased closure of 'world's largest aluminum smelter'

# Zhu Xueying, Zhao Ying

Source: Wall Street Insights

Aluminium Bahrain (Alba), the world’s largest single-site aluminium smelter, has announced the shutdown of three production lines, affecting more than one-fifth of its capacity. Aluminium producers in Qatar and India have also been hit successively, as the Middle East supply chain crisis continues to spread with a highly uncertain restart timeline. The virtual closure of the Strait of Hormuz has simultaneously disrupted both raw material imports and product exports, forcing production cuts to safeguard inventories.

The world’s largest single-site aluminium smelter has been compelled to reduce output, further intensifying the supply chain crisis in the Middle East aluminium industry.

Aluminium Bahrain B.S.C. (Alba) announced on Sunday that it has initiated the phased shutdown of three production lines, accounting for 19% of its total capacity. The direct trigger is the virtual suspension of shipping through the Strait of Hormuz, which has simultaneously blocked the company’s metal exports and alumina raw material imports.

This shutdown has further roiled the global aluminium market, which was already deeply volatile due to the Middle East conflict. Aluminium prices on the London Metal Exchange (LME) have surged to their highest level since 2022, as market expectations for regional supply prospects continue to tighten.

Meanwhile, the Middle East situation shows no signs of clarity in the short term, and the timeline for supply chain recovery remains highly uncertain. According to Xinhua News Agency, Trump stated in a telephone interview with NBC on March 14 that Iran is ready to negotiate a ceasefire, but he is not yet prepared to reach an agreement “because the terms are not good enough.”

## Three Lines Idled, Over One-Fifth of Capacity Affected

Alba operates the world’s largest single-site aluminium smelter with a total annual capacity of 1.6 million tonnes. According to the company’s statement, the shutdown affects Reduction Lines 1, 2, and 3, collectively representing 19% of total capacity, while Lines 4, 5, and 6 will continue normal operations.

The company characterizes this move as a “controlled and safe operational measure,” with core objectives to protect existing raw material inventories, ensure the continued operation of remaining lines, and conduct systematic asset maintenance on the suspended lines to enable future restart.

Majority-owned by the Bahraini state, Alba stated that this “targeted action on specific lines” aims to optimize resource allocation amid limited raw materials, prioritizing overall operational stability.

## Strait of Hormuz Closure Shocks the Entire Middle East Aluminium Supply Chain

The root cause of this production halt lies in the shipping disruption through the Strait of Hormuz. As the critical corridor for aluminium exports and key raw material imports such as alumina in the Middle East, the virtual closure has placed Alba and other regional smelters under dual pressure: shortages of raw material supplies and obstacles to finished product shipments.

Alumina is the core raw material for aluminium production. Once import channels are blocked, smelter inventories deplete rapidly, forcing a trade-off between maintaining full-capacity operations and ensuring inventory security. Alba’s proactive production cut is precisely a preventive measure to manage working capital and mitigate short-term supply volatility risks.

According to Bloomberg, Alba is not the only affected producer. Qatar has already partially suspended aluminium production due to natural gas shortages; India’s Hindalco Industries Ltd. also notified customers this week of suspended sales of extruded aluminium products, citing disrupted gas supplies. Hindalco stated on Sunday that its extrusion operations remain ongoing, but some gas suppliers have declared force majeure, potentially impacting related sales.

## Company Actively Develops Alternative Channels, Restart Prospects Uncertain

According to the company statement, Alba is actively developing alternative supply channels to reduce exposure to the current supply disruption. This indicates that management anticipates the Strait of Hormuz situation will not ease quickly in the short term, shifting crisis response from passive defense to proactive planning.

The company emphasized that this production halt is reversible, and the affected capacity can be restarted once supply chain conditions improve. However, with Trump explicitly rejecting the current Iranian terms and Middle East tensions persisting, the restart timeline remains highly uncertain.

Notably, as the most important industrial metal after steel, aluminium’s supply system relies heavily on global coordination across three links: bauxite mining, alumina refining, and aluminium smelting. Downstream demand often corresponds to highly specialized product specifications that are difficult to substitute quickly. This Middle East crisis has once again exposed the inherent fragility of this supply network, with market concerns about global aluminium shortages clearly reflected in price levels.

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