Middle East war putting European industries under pressure: European Aluminum

The war in the Middle East -- which has prompted two major smelters in the region to announce production cuts -- is starting to put pressure on European aluminum producers and users through double-digit spikes in metal and electricity prices, prompting their representative association to double down on its campaign for Europe's autonomy in aluminum.

The EU is exposed to the Persian Gulf region because it does not produce enough aluminum to meet growing demand, European Aluminium told Platts, part of S&P Global Energy.

The Gulf Cooperation Council's 6.8 million metric tons/year of output accounts for 23% of primary aluminum production outside China and places it among the largest aluminum exporting regions worldwide, which also plays a significant role in supplying Europe.

The EU relies on it mostly for primary aluminum ingots. In 2025, it sourced 1.4 million mt, or 14% of its total aluminum imports, from the Persian Gulf region, with ingots accounting for 86% of volumes, followed by wire rod, sheets, and scrap, according to the association.

European downstream industries, for which primary aluminum is a key input -- automotive, construction, packaging, electrical cables, and engineering applications -- are the most exposed to already higher aluminum premiums and tighter supply and will be the first to feel their impact on manufacturing costs, said the trade body.

The London Metal Exchange aluminum spot price jumped 11% from Feb. 27, the day before the war broke out, to $3,516/mt March 12, the highest level in four years. European physical aluminum premiums quoted on top of the LME benchmark have risen even steeper in reaction to uncertainty and risk perceptions stemming from the Middle East conflict. The duty-paid in-warehouse Rotterdam premium, assessed by Platts at $490/mt on March 12, was 28% higher compared with Feb. 27.

Beyond the primary metal, the EU sources certain specialized aluminum products from the Persian Gulf region, where it also procures around 6% of its scrap imports.

"Scrap availability in Europe, already an area of concern for the industry, would be further strained by additional disruptions," Kelly Roegies, a spokesperson for European Aluminium, told Platts, and stressed that in light of the events, stopping aluminum scrap leakage from Europe is becoming more critical.

In addition, the conflict and the partial disruption of shipping through the Strait of Hormuz are contributing to rising energy prices, which are already up to three times higher in Europe than in competing regions.

"For an energy-intensive sector such as aluminum, fluctuations in power prices have an immediate and significant impact on production costs," said Roegies, specifying that between Feb. 28 and early March, European gas prices -- a key driver of electricity costs -- have gone up from Eur30/MWh ($34.40/MWh) to Eur46/MWh, representing an increase of over 50%.

As gas often sets the price of electricity in Europe, average wholesale electricity prices in major EU markets have also increased by 20%-30% and currently range from Eur80 to Eur120/MWh.

"At this stage, it is too early to provide a clear forecast of the full impact on European industry. Also, detailed data on shipping flows and trade disruptions typically becomes available with some delay, meaning the full picture of any supply impact is not yet visible," said Roegies, adding that the situation in the Middle East remains highly fluid, and much will depend on how it evolves in the coming weeks regarding the extent and duration of any disruption to production or shipping routes in the region.

However, what yet another exposure to external supply shocks and geopolitical tensions has reiterated is Europe's strategic need for autonomy in aluminum, for its domestic production being resilient and competitive, especially given the metal's criticality for energy transition technologies, mobility and defense, according to Roegies.