Gulf aluminum producers looking to reroute exports to safer ports

Persian Gulf aluminum producers are looking at ways to reroute their export consignments to ports outside the Strait of Hormuz amid ongoing severe disruptions to their usual shipping routes.

Two Gulf producers have confirmed to Platts they are exploring bypasses due to the problems passing through the Hormuz chokepoint.

"We have, since the conflict started, continuously been assessing... alternative supply and logistics options where feasible," a spokesperson for Hydro, which holds a 50% share in Qatar's Qatalum smelter, told Platts.

The spokesperson declined to specify routes and volumes, saying, "The situation in the Middle East remains uncertain."

Earlier this week, Aluminium Bahrain, or Alba, said it was considering trucking product through Saudi Arabia to ports on the Red Sea or to Oman, including Sohar and Salalah.

Both aluminum smelters continue to operate, but at reduced run rates: Qatalum has managed to maintain production at 60% of its 650,000 mt/year capacity, and Alba has started idling some 19% of its 1.62 million metric tons/year capacity.

A trader close to Alba estimated that even at the indicated reduced capacity utilization rate, anything between 100 and 150 trucks a day would be needed to transport the smelter's output to non-domestic ports.

Emirates Global Aluminium, which sold 2.83 million mt of aluminum in more than 50 countries last year, declined to share its plans. "We are not going to give a running commentary on how we are managing the current situation," a spokesperson said.

A source who liaises with EGA told Platts the company was working out how it could deliver metal to export markets from a port in Oman.

AlphaMena financial analyst Kais Kriaa told Platts that "rerouting exports was the obvious way to avoid Hormuz chaos" but added that it would take time, especially for the Red Sea ports as they "are becoming extremely busy" and would be costly, particularly for shipments to Asia.

He said that EGA and Alba would normally use Dubai's Jebel Ali Port and Bahrain's Khalifa bin Salman Port.

"The key factor is the duration of the war," said Kriaa, adding that aluminum producers in the region could not withstand a one-month stoppage and would be forced to find solutions to deliver.

The Middle East conflict is now in its third week with little sign of any imminent resolution.

Anoop M. Fernandes, analyst at SICO Bank, said that "while rerouting looks like an option in theory, in real life, it is not that easy," noting that Saudi Arabia does not have a rail line connecting the east and the west of the country.

"It has a road, but today almost every industrial company on the eastern side may want to use it. Then, the trucking capacity may be insufficient to carry all the commodities, and ports on the Red Sea side may not have unlimited capacity either," he said.

Looking further ahead, Fernandes said the shipping vulnerabilities and losses from the ongoing conflict may put the wind in the sails of intraregional and interregional connectivity initiatives in the Middle East, such as the Saudi Landbridge.

It was conceived in the 2000s as a project to connect the east and west coasts by road and rail, but made little progress until a couple of months ago when the government began floating tenders, according to Fernandes.

"It will not be a short-term solution, though, but a massive multi-year endeavor, because you are talking about building something that stretches up to 1,300 km and across uneven terrain," said the analyst.