Aluminum prices have surged to their highest level in four years after a major Middle Eastern supplier suspended deliveries. Aluminium Bahrain (Alba) has declared force majeure on shipments this Wednesday, citing disruptions to transit routes through the Strait of Hormuz.
The action effectively paused deliveries from one of the world’s key suppliers. According to Reuters, prices on the London Metals Exchange rallied as high as $3,418 per ton, the highest level since April 2022. Aluminum has now risen more than 9% this year, outperforming many other industrial metals as supply risks grow.
The Gulf Bottleneck
Alba’s halt does not stem from damage to its operations but from logistics constraints tied to shipping through the Gulf.
“We’re producing, but the metal is here in Alba,” officials said.
The company operates the world’s second-largest aluminum smelter outside China and produced about 1.62 million tons in 2025. Any disruption from such a large supplier has an immediate impact on global markets.
More than 5 million tons of aluminum produced by smelters in the region pass annually through the Strait of Hormuz on their way to customers in Europe, Asia, and North America. At the same time, shipments of raw materials such as bauxite and alumina move in the opposite direction to keep those smelters running.
Prolonging the normalization could further tighten supply. According to Bloomberg, Goldman Sachs warned the price could reach $3,600 per ton if the disruption lasts for a month.
Falling Domestic Capacity
Aluminum’s importance across modern manufacturing amplifies the impact of such shocks. It is the most widely used industrial metal after steel – essential in numerous industries such as automotive, construction, beverage, power, and electronics. Emerging demand from electric vehicles and data centers only amplifies the demand.
Despite the obvious trend, the U.S. has seen a steady decline in domestic smelting capacity. Only six primary smelters remain operational (four commercially), leaving the market exposed to import shocks.
The largest domestic operators are Alcoa Corporation (NYSE:AA) and Century Aluminum Company (NASDAQ:CENX), which run the remaining primary smelting facilities. Yet the U.S. produces less than 1% of global aluminum supply and, even at full capacity, meets only around 30% of domestic demand.
Competing for Power
Producing aluminum is also technically complex. The process begins with mining bauxite ore, refining it into alumina, and then smelting it into aluminum metal through electrolysis. The final stage is extraordinarily energy-intensive, requiring roughly 14 megawatt-hours of electricity for every ton of aluminum produced.
That energy requirement has become the central obstacle to rebuilding U.S. production. Aluminum smelters rely on long-term electricity contracts at relatively low prices to remain profitable. However, soaring power demand — particularly from large technology companies building data centers — has driven electricity prices sharply higher.
Tech giants such as Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corp. (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG) can pay significantly more for power than heavy industry. Due to the margin disadvantage, smelters struggle to secure affordable, long-term energy contracts that they require.
Price Action: Alcoa shares were up 1.72% at $62.61 during premarket trading on Thursday, according to Benzinga Pro data. Century Aluminum shares were up 0.06% at $53.46.
Photo by BildWerk via Shutterstock
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