By Joe Quinn, Executive Director of the Center for Strategic Industrial Materials, SAFE
Aluminum prices have surged, touching $3,492 per tonne, a price last seen in April 2022, and up 10% since the beginning of the Iranian conflict on February 28th.
Last week’s attacks on two of the world’s largest aluminum smelters have increased fears that aluminum prices could face additional upward pressure, and that heightened prices could persist.
These strikes come just weeks after Iran targeted critical energy supply chains throughout the Middle East. Taken together, primary producers are in a precarious position—facing increased energy costs and damaged facilities.
The aluminum market, which was already undergoing a structural realignment before the current conflict, is now teetering on a crisis.
Aluminum’s Structural Realignment
Global primary aluminum production increased by 25%, an estimated 15MT, from 2015 to 2025, a staggering raw number on its face. However, this increase in production has been almost entirely consolidated in China. Outside of China, production has stagnated or declined due to rising energy costs and geopolitical disruptions.
Europe, once a marginal producer and supplier of primary aluminum, has become a structurally import-dependent region. The Russian invasion of Ukraine and the subsequent rise in natural gas prices have led to an energy crisis that has rendered primary production in the region uneconomical.
Sanctions imposed on Russian aluminum producers, limiting access to Western markets, and the recent closures of smelters in Africa, have further constrained global supplies, consolidated production capacity in China, and increased price volatility.
As China nears its self-imposed production limit of 45MT, global production is expected to level off, potentially widening the expected gap between future demand and supply. With China portraying an unwillingness to ramp up production to meet demand in times of need after it has hit its self-imposed limit, concerns are mounting over the markets’ future resilience and the likelihood that localized disruptions, like the one in Iran, will translate into sustained global tightness.
This emerging imbalance between constrained supply and accelerating demand has resulted in structurally higher aluminum prices and heightened volatility. These dynamics translate into rising costs for end users and a growing strategic exposure for the United States.
How the Situation in Iran Impacts Aluminum
The escalating conflict involving Iran is not only impacting oil but also creating risks for aluminum.
The disruption began with sustained strikes on Qatar’s energy infrastructure, knocking out roughly 17% of LNG capacity and constraining natural gas supply critical for aluminum smelting. As a result, facilities like Qatalum have curtailed output, removing an estimated 300,000 tons of aluminum production in the near term.
The conflict escalated further on March 28, when Iran directly targeted aluminum facilities. Aluminium Bahrain (Alba) reported damage and reduced output at the world’s largest single-site smelter. Simultaneously, Emirates Global Aluminium (EGA) sustained significant damage at its Al Taweelah smelter. These damages raise the risk of further outages at two of the world’s largest aluminum production sites.
The sudden disruptions across Qatar, Bahrain, and the United Arab Emirates could remove up to 5,000,000 tons of aluminum production from the global market, with upside risks of worsening damage assessments or prolonged energy constraints. For context, total U.S. primary aluminum production was less than 700,000 tons in 2025.
The strategic risk goes even further. If aluminum from trusted partners becomes unavailable, global markets will look for replacement supply. The most likely sources are not U.S. allies but geopolitical competitors, particularly Russia and China, both of which possess enormous aluminum production capacity and have demonstrated a willingness to weaponize industrial supply chains.
A Strategic Vulnerability
The United States faces a growing mismatch between domestic aluminum production and demand. This increased reliance on imports exposes the country to geopolitical risks and supply disruptions, while higher global prices affect the competitiveness of U.S. manufacturing. Given aluminum’s importance to critical sectors, these trends represent not only an economic challenge but also a strategic vulnerability.
To address this strategic vulnerability, the U.S. must:
- Implement Durable Trade Policy: The U.S. must maintain and strengthen durable trade enforcement mechanisms that ensure a level playing field for domestic producers. This includes preserving the integrity of existing trade authorities and ensuring that any adjustments to tariffs or trade remedies are strategic, predictable, and tied to clear national security and economic objectives.
- Increase Scrap Production: Accelerating domestic recycling reduces reliance on foreign raw materials and exposure to global market disruptions. With modest investments in recycling and processing technologies, the U.S. could recover and redeploy increasing volumes of scrap into vital applications, countering China’s dominance in aluminum production.
- Ensure Competitive Energy Supply: Addressing the structural challenge of high energy costs is critical. Aluminum production is among the most electricity-intensive industrial processes, and access to affordable, reliable power is a prerequisite for domestic viability. Federal policy should prioritize mechanisms that enable long-term power contracting, support the development of dedicated energy infrastructure for industrial users, and expand access to firm, low-cost electricity sources.
- Expand Domestic Capacity: Production tax credits, investment tax credits, and other financial tools can help bridge the persistent gap between the cost of domestic production versus heavily subsidized foreign markets. These incentives should be designed to support both the restart of idled capacity and the development of next-generation smelting and recycling technologies that enhance long-term competitiveness.
A swift and comprehensive policy approach is needed to secure domestic supply and restore U.S. leadership in a sector that has long been a cornerstone of economic prosperity and national defense.
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