Aluminium Bahrain (Alba), one of the Gulf's largest aluminium producers, has initiated a "controlled and safe shutdown" of about 19 per cent of its production capacity due to disruption in the Strait of Hormuz.
The shutdown will affect lines 1, 2 and 3, which contribute to Alba’s total production capacity of more than 1.62 million metric tonnes per annum, the company said in a statement on Sunday.
The move is being carried out as an "operational measure to preserve business continuity" amid continuing supply and transit disruptions affecting the strait, which has been effectively closed for two weeks.
"This targeted, line-specific action is designed to optimise the utilisation of Alba’s existing raw materials inventory and prioritise operational stability across reduction lines 4, 5 and 6," Alba said.
"By concentrating strategic raw materials’ inputs on the most sustainable operating configuration, Alba aims to maintain production resilience, manage working capital prudently, and develop alternatives to reduce exposure to near-term supply volatility."
Although Iran has not formally closed the Strait of Hormuz, a vital waterway for hydrocarbons and other products, traffic has effectively halted through it due to the risk of attacks by Tehran. The closure has been in place since the US and Israel attacked Iran on February 28 in a war that has shown no signs of de-escalation.
About 150 vessels a day are required to transit the strait to keep global energy supplies flowing, but only a small number are currently getting through. Oil prices have surged above $100 a barrel owing to the disruption.
Gulf countries account for about 8 per cent of global primary aluminium production, according to the International Aluminium Institute, with most of it exported to international markets through the Strait of Hormuz.
Central players along with Alba include Emirates Global Aluminium in the UAE, Ma'aden Aluminium in Saudi Arabia, Qatalum in Qatar and Sohar Aluminium in Oman.
Alba said it will implement "structured asset care and maintenance" for the lines that are closed, to safely restart them when overall conditions improve.
The company said it "continues to monitor and respond to the situation and will provide updates to the market as appropriate". It is also working with suppliers and customers to manage commitments and mitigate disruption.
Aluminium prices early last week rose to $3,544 a tonne on Monday, the highest since March 2022, on worries of supply disruptions.
Prices on the London Metal Exchange have since fallen and are at around $3,439.5 a tonne. Experts told The National that prices are likely to remain elevated.
“Given the low level of stocks, limited idled capacity, which has viable ways to restart, supply disruption could lead to prices pushing towards $4,000 per tonne,” Ross Strachan, head of aluminium raw materials at the commodities research firm CRU Group told The National last week.
