On March 29, Aluminium Bahrain (Alba), which operates the world's largest aluminum smelter, reported that its facility was subjected to an Iranian attack as the U.S.-Israel-led war extended into a second month [1]. The attack occurred on Saturday, and Alba is currently assessing the extent of the damage while prioritizing operational resilience and employee safety [1]. Prior to the attack, Alba had already reduced its production capacity by 19% of its 1.6 million tons annual output as a precautionary measure due to ongoing supply and transit disruptions affecting the Strait of Hormuz [1].
These production cuts have intensified concerns about a global aluminum shortage, with prices surging to four-year highs earlier in March before easing slightly. Aluminum prices remain 4.3% above their February 27 levels, reflecting persistent supply risks [1]. The metal is vital for industries such as electronics, transport, construction, solar panels, and packaging, making disruptions particularly impactful for the global economy [1].
The broader regional conflict has seen Iranian-backed Houthi forces fire missiles at Israel for the first time, and analysts warn that the Houthis could attempt to block maritime traffic through the Bab el-Mandeb Strait, a key route for global trade [1]. The Bab el-Mandeb Strait accounted for 12% of seaborne oil trade and 8% of liquefied natural gas trade in the first half of 2023 [1]. Iranian forces have also effectively shut down the Strait of Hormuz, previously responsible for about 20% of global oil supplies [1].
Market reactions have been swift, with oil prices closing at their highest level in more than three years on Friday, and aluminum prices reflecting heightened supply risks [1]. Major shipping companies like Maersk have responded to reports of drone activity and explosions at regional ports, underscoring the threat to global trade routes [1].
CONCLUSION
The Iranian attack on Alba's smelter and ongoing regional disruptions have significantly heightened fears of a global aluminum shortage and supply chain instability. With aluminum and oil prices surging, the market is reacting strongly to escalating risks in the Middle East. Continued conflict and potential maritime chokepoints could further impact global commodity flows and prices.