Canada's Aluminium Exports Pivot to Europe Amid Gulf War and US Tariffs

Canada's aluminium industry has become a central pressure point in a global supply chain reshaped by war in the Middle East and steep United States import tariffs. Since the conflict between Iran, the United States and Israel began on 28 February 2026, shipping through the Strait of Hormuz has been repeatedly disrupted, cutting the flow of alumina feedstock into Gulf smelters and blocking exports of finished metal. The Gulf Cooperation Council supplies close to 9 percent of the world's primary aluminium, so the loss of output has rippled across every major market.

The impact on Gulf producers has been severe. Regional output fell to roughly 330,000 tonnes in April 2026, the lowest monthly figure in more than a decade, after missile and drone strikes late in March damaged Emirates Global Aluminium's Al Taweelah plant in the United Arab Emirates and Aluminium Bahrain's operations. Emirates Global Aluminium declared force majeure and has warned that a full restart of Al Taweelah could take up to a year regardless of when the fighting ends. With inventories already thin, the London Metal Exchange three-month price climbed from below 3,000 dollars a tonne at the start of the year to a four-year high near 3,855 dollars on 2 June.

Prices then reversed sharply. A memorandum of understanding reached in mid-June raised hopes that the strait would reopen, and aluminium fell about 16 percent over the month, its steepest monthly drop since 2008. By early July the metal had slipped below 3,100 dollars a tonne. The relief proved short-lived. After ships were attacked in the strait on 6 and 7 July, the United States stepped up strikes on Iranian targets, Iran hit sites in Bahrain and Kuwait, and prices rebounded toward 3,150 dollars as traders priced war risk back in. Analysts still expect the global aluminium market to run a deficit in 2026.

This is where Canada matters. Quebec produces the large majority of Canadian aluminium using hydroelectric power, which makes its metal both cost-competitive and attractive to European buyers facing carbon border charges (Quebec aluminium carries a very low carbon footprint, so it faces almost no carbon border charge when entering the European Union). Two forces are now pulling on Canadian supply. On one side, United States Section 232 tariffs, raised to 50 percent in June 2025, have made shipments into the American market far less profitable. On the other, European manufacturers working to replace lost Gulf metal are bidding aggressively for Canadian tonnes.

The result is a rapid redirection of trade. The United States took about 78 percent of Quebec aluminium exports in the second quarter of 2026, down from 95 percent in the first quarter, while Europe's share jumped from almost nothing to roughly 18 percent. At Aluminerie Alouette in Sept-Iles, North America's largest smelter, the share of metal shipped to Europe rose from 4 percent to 57 percent over the same period. Canadian exports to the European Union passed one million tonnes in 2025 for the first time.

Canadian producers absorbed heavy losses when the higher United States tariff first landed, estimated at close to 600 million dollars over about eight weeks, but have since adapted by reselling metal, sourcing from rivals and leaning on European demand. Rio Tinto has added roughly 160,000 tonnes of new low-carbon capacity through its AP60 expansion at Complexe Arvida in the Saguenay region, and Ottawa has set up a fund to cushion tariff damage while pressing Washington on trade.

For downstream buyers the practical effect is higher and more volatile costs. Automotive, packaging, aerospace and construction users worldwide face elevated premiums, longer lead times and growing pressure to diversify sourcing, lean on scrap and recycled metal, or substitute other materials where possible. Chinese output has risen to partly fill the gap, but trade barriers limit how far that metal can flow into deficit markets.

The situation remains unresolved. As long as the truce over the Strait of Hormuz stays fragile and Gulf capacity recovers slowly, Canadian smelters will stay caught between a tariff-walled American market and a supply-hungry Europe, keeping global aluminium supply chains under strain into 2027.