ALFED is currently engaging with the Department for Business and Trade (DBT) to ensure that the UK Government is fully aware of the emerging impacts of the conflict in the Middle East on the aluminium industry.
In recent days, ALFED has been gathering feedback from members across the aluminium value chain to understand the early effects of the situation on supply chains, costs, operations and market demand. This information is being shared directly with Government to provide a clear picture of how geopolitical developments may affect the UK aluminium sector and the wider manufacturing supply chain.
Initial feedback from members highlights a number of potential pressures developing across the industry. Approximately 9% of global aluminium production comes from the Middle East, with around 30% of that supply typically flowing into Europe. Disruption to production and shipping routes in the region, alongside force majeure notices issued by several producers, is beginning to tighten the availability of aluminium into European markets.
This pressure is occurring alongside existing structural changes in the European market. Recent rationalisation of production capacity has removed approximately 250,000 tonnes of billet supply from Europe, further tightening availability for downstream manufacturers. At the same time, demand for extrusion products in parts of Europe, particularly Germany, is expected to increase in 2026, adding further pressure to already constrained supply chains.
Members are already reporting significant increases in melt premiums, with some indicating that premiums have risen by around 15% so far in 2026, with expectations that a further 15–25% increase could occur in the coming weeks if supply disruptions persist. In some cases, suppliers have already paused taking new orders, creating uncertainty around material availability beyond the next few months.
Energy costs are also a major concern for the sector. Aluminium production and processing are highly energy-intensive, and while some companies have hedged a portion of their energy exposure, many still have a significant proportion of their energy requirements exposed to market volatility. Current feedback suggests that some companies have hedged approximately 60% of their energy costs for the remainder of 2026, leaving the remaining 40% exposed to potential increases linked to geopolitical developments.
There are also early indications that demand may be weakening in response to rising costs and market uncertainty. Some members have reported order intake falling by around 30% compared to the run rate seen earlier in 2026, as customers delay purchasing decisions and place only the minimum volumes required to maintain existing projects or contractual commitments.
Logistics and transport costs are also beginning to increase as rising oil prices feed through into higher diesel and fuel surcharges, adding further inflationary pressure across supply chains.
At this stage, the full implications of the conflict for the aluminium industry are still developing. However, the combination of tightening supply, rising material prices, increasing energy costs and weakening demand could create significant challenges for parts of the sector in the coming months.
ALFED will continue to engage closely with DBT and other relevant departments to ensure that Government understands the challenges facing the sector and the potential implications for UK manufacturing.
ALFED welcomes further updates from members on how the situation is affecting their businesses. Member insights play a crucial role in enabling the Federation to provide timely and accurate feedback to Government and to ensure that the interests of the UK aluminium industry are effectively represented as the situation evolves.
