Aluminum: Comprehensive Analysis and Its Role in the Saudi Financial Market

Aluminum is a metallic chemical element symbolized by Al, characterized by its silver-gray color and lightweight. It is classified among the basic metals in global financial classifications, ranking third in abundance in the Earth's crust after oxygen and silicon. Aluminum boasts unique mechanical properties such as corrosion resistance, high recyclability, and good thermal and electrical conductivity. It does not rust under natural conditions due to the formation of an oxide layer that protects it from corrosion, making it suitable for use in a vast number of industries. In the Saudi financial market, aluminum is part of the basic materials sector – metals and mining, influencing commodity indices and the performance of manufacturing and mining companies. Its manufacturing methods vary from bauxite extraction (aluminum ore), alumina production (aluminum oxide), to smelting alumina to produce the final metal. The sector is closely linked to energy and petroleum prices, making it sensitive to global economic and energy fluctuations.

Global aluminum markets experienced sharp price fluctuations during 2024 and 2025 due to the interplay of several factors such as declining global inventories, rising energy costs, and changes in supply and demand. At the beginning of 2024, the price of aluminum per ton on the London Metal Exchange (LME) rose to over $2,600, but stabilized between $2,300 and $2,500 by mid-year. This stability is attributed to increased Chinese production and decreased demand in some industrial sectors. Global aluminum production reached approximately 65–70 million tons annually in 2023–2024, with China alone accounting for about 55% of this production, making it the dominant player in the market. In Saudi Arabia, detailed official data on aluminum production is not available, but the Ma'aden-Alcoa project in Ras Al Khair has provided a production capacity of nearly 1.48 million tons annually. The Kingdom's consumption largely relies on imports to meet local industrial needs, especially with the accelerating growth in construction and manufacturing sectors. Price volatility in energy is a critical factor in determining aluminum production costs, as production heavily depends on electricity, and Saudi Arabia has initiated efforts to improve energy efficiency in local smelters to reduce costs and enhance competitiveness.

There is no Saudi company listed on Tadawul that specializes exclusively in aluminum production; however, there are key companies closely related to the value chain. Among the most notable is the Saudi Arabian Mining Company (Ma'aden, symbol: 1211), which is involved in a project with the American company Alcoa to produce alumina and aluminum in Ras Al Khair. Additionally, some industrial and petrochemical companies, such as the Saudi Basic Industries Corporation (SABIC), are classified as consumers or supporters of the aluminum industry by supplying raw materials or conversion products. The stock of Hail Cement Company (symbol: 3001), while belonging to the building materials sector, may be indirectly affected by developments in the global aluminum market, especially in construction. Saudi financial indicators monitor the performance of these companies and their sensitivity to basic metal prices, noting that aluminum is included in the commodity indices basket provided by Tadawul.

The aluminum supply chain in the Kingdom relies on a mix of local production and imports. The process begins with bauxite extraction (aluminum ore), then converting it to alumina, and finally smelting it in specialized factories. The Ras Al Khair aluminum project is the cornerstone of the Saudi industry, developed in partnership between Ma'aden and Alcoa, with a designed capacity of 1.48 million tons annually of molten aluminum. The project aims to enhance value-added through local production, providing key inputs for construction, automotive, packaging, and renewable energy sectors. Despite this progress, the Kingdom still heavily relies on imports, especially for specialized final products. Vision 2030 aims to enhance industrial integration and increase the share of local manufacturing, focusing on developing recycling technologies and improving energy efficiency in supply chains.

Energy costs are one of the most influential factors in the aluminum industry, as the electrolytic smelting process of alumina consumes massive amounts of electricity. This poses a challenge amid global energy price fluctuations, especially with the rise of environmental initiatives and carbon emission restrictions. In Saudi Arabia, relatively subsidized energy sources provide a competitive advantage, but the shift towards renewable energy has become essential to meet global standards. Modern factories in the Kingdom are trending towards using solar energy in smelters, and efforts are underway to increase aluminum recycling rates to reduce energy consumption by up to 95% compared to production from raw materials. On the other hand, some global markets have imposed environmental tariffs on imported aluminum products (such as the European CBAM), encouraging local producers to adopt environmentally friendly practices to ensure access to export markets.

Aluminum plays a pivotal role in supporting vital sectors within the Saudi economy. In the manufacturing industry, aluminum is used in the production of various products such as metal structures, windows, doors, and spare parts for vehicles and aircraft. The construction sector is one of the largest consumers of aluminum, especially as the Kingdom aims to develop massive infrastructure projects under Vision 2030. Aluminum also supports the renewable energy sector through the manufacturing of solar panel frames and components for wind stations. The increasing demand for lightweight transportation (electric vehicles and others) enhances aluminum consumption, as it contributes to reducing weight and improving energy efficiency. This trend is expected to continue with the growth of smart transportation projects and sustainable cities in the Kingdom.

The aluminum sector is highly competitive at both regional and global levels. China leads global production, followed by countries such as India, Russia, the UAE, and Canada. In the region, Emirates Global Aluminium (EGA) and the aluminum smelting plant in Oman boast significant export capabilities. Saudi Arabia faces strong competition from these countries, especially given the availability of cheap electricity and abundant raw materials. Globally, companies like Alcoa (USA), Rio Tinto Alcan (Australia/Canada), Rusal (Russia), and Vedanta (India) compete for market share. Government policies, energy support, and technological developments in recycling scrap influence price structures and market share distribution. The Kingdom seeks to enhance its competitiveness by developing high-efficiency production projects and investing in emission reduction technologies and sustainability.

There are no local futures contracts on aluminum in Tadawul as is the case in global metal exchanges; however, Saudi financial indices track aluminum performance as part of a commodity index basket. For instance, Tadawul launched an industrial metals commodity index that includes global aluminum contracts, allowing traders to monitor price movements and their impact on the performance of related company stocks. Additionally, some investment funds in the market provide exposure to an industrial metals portfolio, albeit indirectly compared to investing in aluminum futures contracts or global exchange-traded funds (ETFs). Tracking commodity indices remains an important tool for analyzing risks and opportunities in sectors related to basic metals.

Fluctuations in aluminum prices affect the profits of companies listed on Tadawul, particularly those linked to industrial and construction supply chains. Industrial and petrochemical companies that rely on aluminum as a raw material are directly affected by its purchase cost, which reflects on profit margins. For example, Ma'aden (symbol: 1211) is influenced by global aluminum contracts due to its partnership in the Ras Al Khair project. Meanwhile, building materials companies like Hail Cement Company (symbol: 3001) may see their product prices indirectly affected due to aluminum use in equipment or industrial facilities. Financial indicators such as price-to-earnings ratio, earnings per share, and revenue growth provide important insights for analyzing the performance of these companies amid aluminum market fluctuations.

The aluminum sector witnessed several significant developments during 2024–2025, most notably price fluctuations, expansion of production capacities in China and Gulf countries, and increased focus on sustainability. Prices reached their highest levels in late 2023 before stabilizing with increased supply. Protective measures, such as imposing tariffs and environmental fees on aluminum imports in Europe and America, prompted some countries to expand investments in low-carbon aluminum production. In the region, Oman announced new expansions in smelting plants, while Saudi Arabia is developing new projects to increase local value-added through investments in aluminum and recycling plants. Aluminum companies have also launched initiatives to use clean energy in smelting operations, enhancing competitiveness and responding to global environmental standards.

The aluminum industry in Saudi Arabia faces several challenges, the most significant being rising energy costs, environmental regulatory requirements, and intense competition from global producers. Additionally, reliance on imports for some final products poses a challenge to achieving self-sufficiency. On the other hand, Vision 2030 provides significant opportunities for sector development by encouraging investment in mining projects, enhancing industrial integration, and supporting clean technologies. The increasing trend towards recycling represents an opportunity to reduce costs and minimize environmental impact. The sector is also expected to grow with rising demand for aluminum products in infrastructure projects, renewable energy, and smart transportation. Investment in research and development and adopting advanced sustainability practices enhances the Kingdom's competitiveness regionally and globally.

The global shift towards clean energy and sustainable mobility enhances the importance of aluminum as an environmentally friendly industrial option due to its lightweight and recyclability. The Kingdom focuses on integrating aluminum into electric vehicle projects, green buildings, and solar energy stations, opening new growth avenues in the sector. Projects like NEOM and renewable energy initiatives provide opportunities to increase local demand for aluminum products. Saudi Arabia is expected to invest in establishing advanced recycling facilities and developing aluminum plants powered by clean energy to reduce emissions and achieve competitiveness in global markets. Continuous research into developing new aluminum alloys supports its use in advanced industrial applications.

Although there is currently no Saudi company exclusively dedicated to aluminum production listed on Tadawul, investors can gain exposure to the sector through several indirect methods. These include investing in shares of mining companies such as Ma'aden (symbol: 1211), or industrial companies that use aluminum in their products. Some investment funds also provide exposure to aluminum futures contracts or industrial metals portfolios through commodity indices. Financial indicators such as price-to-earnings ratio, earnings per share, and revenue growth track developments in these companies. Investors should study the factors influencing the aluminum market, such as global supply and demand, energy costs, and geopolitical fluctuations, while considering the necessity of consulting a licensed financial advisor before making any investment decision.