Norsk Hydro sees aluminum supply risks as Gulf flows deteriorate

The global aluminum market will face deepening deficits if constraints on shipments through the Strait of Hormuz continue, according to leading European producer Norsk Hydro ASA.

Flows through the critical waterway have deteriorated since the resumption of hostilities between the US and Iran, inhibiting incoming supplies of raw materials and outbound metal exports from the Persian Gulf, Hydro CEO Eivind Kallevik said in an interview.

The Iran war has led smelters in the Middle East, which produce nearly a 10th of the world’s aluminum, to seek out alternative logistic routes, while producers elsewhere are boosting output. But a protracted conflict would drive the market’s supply gap beyond the 900,000-ton shortfall that Hydro currently expects, Kallevik said.

“It’s quite clear that the situation has deteriorated quite rapidly,” Kallevik said, referring to shipping through Hormuz. “The more protracted the situation in the Gulf is, logically the tighter the market will be globally.”

The aluminum market has been roiled by the conflict, with a major reordering of global supply chains helping to blunt some of the impact. China and Indonesia have delivered an unexpected supply boost, while other producers including Norsk Hydro have also been seeking to ramp up output.

European manufacturers have also been drawing down inventories since the war began, helping to mitigate the impact of outright shortages in the regional market up to now, Kallevik said.

“There was ample supply in many port inventories at the beginning of year,” Kallevik said, noting that incoming shipments had risen ahead of the introduction of a new carbon levy on aluminum imports. “The acid test for the rest of 2026 is how many cargoes we get in to replenish those inventories.”

Production from Norsk Hydro’s recycling operations rose 15% to about 225,000 tons over the second quarter, with profitability boosted by a rise in product prices seen as overall supplies tightened. The group’s overall adjusted earnings before items rose 15% year over year to 8.92 billion kroner ($929 million), beating analysts estimates. 

Aluminum prices on the London Metal Exchange have risen this month as the Middle East conflict escalated, following a slump in June when tensions eased.

(By Mark Burton)