Expectations for Gulf Aluminum Production Capacity to Return to 100% by Early 2027

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Bernard Al-Dahdah, a commodities analyst at Natixis, stated that the aluminum flow conditions from the Gulf region have improved significantly compared to the beginning of the year, despite the continued logistical challenges related to export routes and the import of raw materials.

Al-Dahdah explained in an interview with "Al Arabiya Business" that Emirates Global Aluminium (EGA) is expected to return to full production capacity during the first quarter of next year, noting that the region used to export about 6 million tons of aluminum, while current exports have declined to about 4 million tons.

He added that most Gulf aluminum exports were previously conducted via maritime transport, but the situation is different now, as large quantities are being transported overland, unlike oil, which has returned to traditional shipping routes via tankers.

He pointed out that major aluminum companies in the region, such as Emirates Global Aluminium, Alba of Bahrain, and Qatalum, still need to import essential raw materials, including alumina and bauxite, while Saudi Ma'aden enjoys a greater degree of self-sufficiency. He noted that the import operations for raw materials still partially rely on overland transport, which raises operational costs.

Al-Dahdah explained that the shift from maritime to land transport adds significant financial burdens on producers, estimating the increase in cost to be about $300 per ton depending on the shipping route and point of departure, whether through the Port of Sohar in Oman or through other ports like Jeddah. He added that this increase could represent about 10% of the cost of aluminum production.

Despite the rising costs, he confirmed that aluminum prices remain high compared to their historical averages, providing a strong economic incentive for companies to continue exporting even with increased transportation costs.

Regarding the repair works that followed the damages sustained by some aluminum facilities in the region, Al-Dahdah said that Alba indicated in a report released in early September that the damages were relatively limited, while Emirates Global Aluminium confirmed that it expects to return to full operation by the beginning of next year.

He added that his estimates indicate a return of the production capacity of Gulf countries producing aluminum to 100% by the beginning of next year, with the completion of repair works and the restoration of supply chains to their efficiency.

Al-Dahdah clarified that the aluminum market still suffers from a supply shortage, as Gulf producers have not yet been able to return to their previous export levels fully.

He pointed out that Arab countries represent between 8% and 9% of global aluminum production, and about 15% of the global trade volume of the metal, which gives the region a significant weight in market balances.

He noted that other countries have started to compensate for part of the supply shortage, explaining that Indonesia increased its aluminum exports in August by about 30% compared to previous periods, and China also increased its exports, which helped ease price pressures.

He said that the price of aluminum has decreased from levels close to $3700 per ton to about $3200 per ton currently, yet it remains much higher than its historical levels.

Al-Dahdah explained that the rise in prices has not yet led to a destruction of demand to the extent seen in the copper market, confirming that the demand for aluminum is still supported by strong structural factors.

He added that the solar energy sectors, data centers, and the global transition in the energy sector continue to boost demand for industrial metals, including aluminum, noting that the expansion of energy transition projects and the increasing spending on data centers impose additional pressures on metal markets and support prices in the medium and long term.