What happens when iron(III) oxide is heated with aluminium powder ? 

Iron (III) oxide is heated with aluminium powder to form iron and aluminium oxide. This is another example of a displacement reaction and is highly exothermic. This reaction is also known as thermit reaction . 

$F{e}_2{O}_3(s)+2Al(s)\to 2Fe(l)+A{l}_2{O}_3(s)$ + Heat