When do you use aluminum powder to reduce iron oxides?
When you ain't got no gas bottles.
Chemistry is still (thankfully or infuriatingly) an experimental science. Chemists prefer reactions that work. Unfortunately, most of the reactions that chemists do don't work! (This is why that higher degrees take take 3 or 4 or even 5 years. If all your reactions worked you would be out of the laboratory and out of the university in 9-12 months.)
So if your aluminum reaction works in iron reduction you should do it on the small scale. On the industrial scale, it would be a highly expensive way to make iron in that you have to expend A LOT of electrical energy to make the aluminum reductant. On the other hand, iron smelting and refining has been performed by humanity for maybe 3000 years. We can use
If you ever have the opportunity to visit an iron foundry, do so. You feel very small, and you are humbled by the process.