Normally, the GCC produces around 6.2 million tonnes per annum (mtpa) of aluminium. Of this, Iran produces another 620,000 tonnes, which was around 8.5 per cent of global 2025 production. GCC exported 4.7 mtpa in 2025, which was close to 6.5 per cent of global consumption.
Local smelters such as Qatar’s Qatalum and Bahrain’s Alba have announced force majeure. Qatalum’s 0.65 mtpa aluminium smelter initiated a controlled shutdown on March 3, after suspension of gas supply by Qatar Energy, which announced force majeure. Alba (1.65 mtpa) also announced force majeure on contract deliveries from March 4, due to the closure of the Strait, though it continued production. A full restart of a smelter can take many months. Moreover GCC smelters are generally not geared to directly electrolyse bauxite (raw ore) and need alumina supplies, which makes alternate supplies more difficult.
This creates a big risk of a global deficit. The London Metal Exchange (LME) aluminium has spiked. Indian producers such as Vedanta, Hindalco, and Nalco are well placed in this situation, given local supply of raw materials and less fuel uncertainty.
In addition to the GCC, Iran’s smelters operate at over 90 per cent utilisation, with 6.8 million tonnes of production in 2025. The GCC is the largest net exporter of primary aluminium, mostly to the US and Europe, supplying over 20 per cent of total imports to those regions. Smelters in Europe could also be forced to shut if gas supply disruptions continue.
Commodity traders were estimating that the global Al market could see a tight supply-demand situation between 2026 and 2028, before the war started. Now, there’s more or less a guarantee that there will be supply deficits. A prolonged war could create a more stressed demand overhang since aluminium demand tends to rise as it is a key raw material for many defence related products and munitions.
India’s bauxite supplies are local and most smelters run on coal (captive power supply is also thermal or renewable). Thermal coal imports may become more expensive, but supply is not an issue. Global prices are likely to remain elevated, given the direct impact of geopolitics.
Hindalco and Nalco could see some impact on rising cost of thermal coal and other raw material costs, but aluminium prices have strengthened and may outrun raw material inflation in Q4FY26. Aluminium prices have risen over 8 per cent on fears of GCC supply risks. Bloomberg estimates that a prolonged conflict could lead to the global aluminium deficit hitting 5.7 million tonnes or more, given the chances of disruptions in Indonesia and a squeeze of European smelters.
LME prices have spiked to multi-year highs in March at over $3,200 per tonne, though there’s huge volatility as news flow swings prices around. Aluminium spreads of LME prices minus alumina costs and minus coal costs are at record highs.
There would be a change in sentiment if the conflict stops, but in engineering terms, infrastructure has been severely damaged in the region, gas supply may be restricted as a result, and it takes months to reopen mothballed smelters anyway. So it’s likely that GCC supply may remain off the table for a prolonged period. And if the conflict persists, it could lead to even tighter aluminium supply.
India’s producers with their localised raw material sources and integrated operations are well positioned to benefit from rising aluminium prices and that impact is being seen in the stock market where stocks like Vedanta and Hindalco are seeing support. Similar logic also applies to other industrial metals leading to traders being bullish on this space. Valuations for metals players have not corrected as much as the broader markets due to this.
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