Gulf Aluminium Rerouting Capacity Falls to 40%

Gulf Aluminium Rerouting Capacity Falls to 40% Amid Strait of Hormuz Disruptions

Gulf aluminium producers can now reroute only about 40 percent of output away from the Strait of Hormuz, down from earlier estimates of as much as 80 percent, according to Swiss private bank Julius Baer. This reduced rerouting capacity, driven by ongoing disruption to key facilities, could result in a loss of around 3.5 million tonnes of market capacity in the coming months, as stated in the April 23, 2026 report.

Force Majeure Declarations and Production Halts

Attacks on key facilities have forced some operators to declare force majeure, suspending contractual obligations due to unforeseen events without liability. Emirates Global Aluminium invoked the clause on some deliveries after strikes halted operations at its Al Taweelah smelter, according to Bloomberg. Aluminium Bahrain also declared force majeure in March following the beginning of the Iran war.

Global Supply Impact

The Gulf accounts for about 9 percent of global primary aluminium supply. With approximately 3.5 million tonnes of annualised capacity at risk in the coming months, the disruption has significant implications for global aluminium markets. Carsten Menke, head of next generation research at Julius Baer, noted that prices above $3,500 per tonne signal the market may need to see demand destruction to rebalance supply.

Alternative Rerouting Routes and Market Outlook

Two smelters declared force majeure at the start of the war, reflecting the de facto closure of the Strait of Hormuz. Since then, Gulf producers have begun securing alternative outlets via ports that do not depend on the strait. However, factoring in damage and logistical challenges, Julius Baer estimates that only around 40 to 45 percent of the region's production will be rerouted.

Menke stated that a broader wave of production cuts across the Middle East beyond current levels does not seem likely, as alternative trading routes have been secured and tensions have eased, reducing the risk of further damages. The fate of single smelters does not determine that of others, he added.

Price Outlook and Escalation Risk

Assuming no further escalation of tensions in the Middle East, Menke said prices are close to their peak. However, if hostilities escalate again and result in lasting damage to aluminium infrastructure in the region, prices could rise another 10 percent from current levels. A key factor for the market to retrace from current levels would be realising that the announced rerouting of production is actually working, according to Menke.

The risk of a genuine global supply shock has been drastically reduced by Middle Eastern smelters' efforts to reroute raw material imports and final product exports, Menke noted. Avoiding the chokepoint of the strait was key for them to maintain production and revenues.