(Bloomberg) – Emirates Global Aluminium aims to restore production early next year after an Iranian strike shut its main smelter in March, potentially helping a metal market that’s seen prices surge on supply shortages.
EGA said it’s spending $400 million on repairs to lift production to pre-war levels in the first quarter next year, while working to accelerate that timeline. That will boost supply prospects in a region that accounted for about 10% of global output before the conflict. Even after output at the Middle East’s top aluminum producer recovers, shipments will depend on the reopening of the Strait of Hormuz, EGA said in a statement Wednesday. That key chokepoint at the entrance to the Persian Gulf has been largely shut since the US and Israel attacked Iran at the end of February.
The company was forced to slash output after the smelter at Al Taweelah in Abu Dhabi was struck by Iranian missiles and drones during the early stages of the war. The damage forced EGA to invoke force majeure clauses to suspend some deliveries from a plant that had the capacity to produce 1.5 million tons of aluminum a year.
Still, the company has continued to export metal by relying on routes that avoid Hormuz. EGA previously said it would take about a year to repair the damage. “We have also been successful in ensuring that we are getting out enough metal compared to our current pace of production, which means that we are drawing down inventories,” Chief Financial Officer Pal Kildemo said in an interview. “As we ramp up at Al Taweelah, we will need to continue to strengthen the outbound routes.”
The company has also been able to secure sufficient capacity to import raw materials for its alumina refinery and to fully support current production, Chief Executive Officer Abdulnasser Bin Kalban said in the same interview.
EGA has started about 18% of the aluminum production pots at the smelter, up from 7% in early July. The company’s bill for repairs provides one of the first cost estimates for regional reconstruction.
The US war against Iran has roiled global markets by cutting off trade flows of key energy, metals and chemicals supplies out of the Persian Gulf, with traffic through Hormuz still at a fraction of previous levels. Gulf countries that have long relied on seaborne traffic for the bulk of their exports are now scrambling for alternative routes that avoid Hormuz.
The United Arab Emirates plans to expand ports on its eastern coast, where a container and oil hub in the emirate of Fujairah already provides access to the Indian Ocean. Countries like Kuwait, Iraq and Qatar have been largely isolated from their main export markets, while Saudi Arabia has shifted traffic to the Red Sea, where flows are facing renewed threats from Yemen’s Iran-backed Houthis.
The Islamic Republic struck infrastructure across the region, including aluminum production in Bahrain, in retaliation for US-Israeli attacks on the country.
EGA said Wednesday that its adjusted net profit for the six months ended June rose 34% to $670 million from a year earlier, helped by higher aluminum prices.
