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Key takeaways:
Consistent with his Made in America framework, US President Donald Trump expanded Section 232 tariffs on aluminium imports in his second term, with the intention to encourage US primary aluminium production. While tariffs have raised the Midwest premium for primary aluminium, energy remains a significant topic of conversation for US aluminium industry participants. The need for affordable, abundant energy was a significant topic of conversation at the Aluminum Association annual meeting, held in Washington on September 17-19.
“When you think about the energy intensity that is required for an aluminium smelter, you’re talking about basically powering a city,” Kelly Thomas, Aluminum Association vice chairperson, said at a press roundtable on September 18.
Thomas is also the chief executive officer of specialty aluminium products manufacturer Vista Metals.
The Aluminum Association has reported that a new aluminium smelter requires a long-term power contract roughly equivalent to powering a city the size of Boston or Nashville, Tennessee, for a year.
“Building more US-based aluminium smelters is a laudable goal and one that the industry absolutely supports,” Thomas said.
“Making that happen is much more a function of energy, than of tariffs,” Thomas continued.
Chicago-based aluminium producer Century Aluminum cited Trump’s Section 232 tariff increases for its investment to re-start a production line at its Mt. Holly smelter in South Carolina. But William Oplinger, president and chief executive officer of global aluminium producer Alcoa, has said long-term investment decisions will not be made on tariff policy alone, without long-term low-cost energy.
“Low-cost electricity is the single most important factor for aluminium smelting, because power makes up roughly 40% of total production costs — and about 80% of industry emissions stem from electricity use,” Annie Sartor, aluminium campaign director at Industrious Labs, told Fastmarkets on Thursday September 25.
“Without affordable electricity, US producers still face cost disadvantages and can’t compete globally or support long-term jobs and investment. Addressing energy costs, especially by expanding access to renewables, matters far more for sustaining a healthy domestic industry than tariffs alone,” Sartor said.
“I know the administration is keen on looking at ways to help the industry,” Thomas said. “It’s not just about the tariffs — it’s about finding affordable energy and making that part of the solution.”
Fastmarkets assessed the daily aluminium P1020A premium, ddp Midwest US at 74-76 cents per lb on Monday September 29, unchanged day on day but up from 73.00-75.50 cents per lb on September 12.
Despite the tariffs raising the Midwest premium with the intention to encourage growth in primary aluminium production, the Aluminum Association said at its spring meeting that a new smelter requires approximately $5 billion and five years to build.
“I think the government simply thought [the tariffs] would encourage additional smelting capacity to either re-open here or start back up again,” Lucy Winchel, international commodities trader Traxys Global’s director of aluminium, said at the Recycled Materials Association’s (ReMA) Roundtables in Chicago on September 12.
“It’s not practical because you need assurances that the prices will stay at a certain level and also on the inputs, especially energy, which is a huge component to making aluminium,” Winchel said.
Both Century Aluminum and Emirates Global Aluminum (EGA) have announced they were working on building the first US smelter in around 45 years.
While Century has yet to announce a location due to energy challenges, EGA has selected the Tulsa Port of Inola in northeastern Oklahoma as the site of its US smelter. EGA is currently in negotiations with local utility Public Service Company of Oklahoma.
“Century needs to guarantee access to enormous quantities of reliable, uninterrupted, low-cost electricity for its proposed new smelter,” Sartor told Fastmarkets.
Most regions, Sartor said, cannot provide the city-size scale of clean, affordable energy through stable, long-term contracts — which makes it hard for Century to make a commitment.
The US currently has four primary aluminium smelters — two owned by Century Aluminum and two owned by Alcoa. The four smelters produce 683,500 tonnes of aluminium, according to a May 2025 Aluminum Association white paper.
Of the four US smelters, only two currently operate at full capacity. In early August, Century announced a $50 million investment to restart more than 50,000 tonnes of idled production at its Mt Holly smelter, bringing it to full capacity by June 30, 2026.
The Aluminum Association reported that the US produced over 4.65 million tonnes at 33 sites in 1980. But the deregulation of US electricity prices starting in 1977 led to increased industrial electricity rates.
The trade association described the deregulation of energy prices as “the single most important factor leading to the near total demise of the primary aluminum industry.”
The association reported 2023 industrial power costs in the states with idled primary aluminium capacity ranging from $65.50 per megawatt-hour in Kentucky to $82.40 per MWh in Indiana.
The US sources nearly two-thirds of its primary aluminium from Canada, where average purchased electrical costs for smelters range from $26.50-41.00 per MWh, according to the association. Canadian smelters pay lower electricity costs due to low-cost hydroelectric power.
As political and economic sentiment has pushed for domestic production, including domestic smelting, advancements in artificial intelligence (AI) have created more demand for energy from data centers.
The US Department of Energy reported in 2024 that data centers consumed about 4.4% of total US electricity in 2023, which is expected to grow to 6.7-12% of total US electricity by 2028.
The total data center electricity usage climbed from 48 terawatt-hours in 2014 to 176 TWh in 2023, with a projected usage of 325-580 TWh by 2028.
The Aluminum Association’s website said a single new aluminum smelter uses approximately 11 TWh of electricity.
Smelters have to compete with other large power users, like data centers, Sartor said. Large technology companies have “no limit” on what they’re willing to spend for that electricity, Sartor said.
In its white paper, the Aluminum Association described data center demand for electricity as being price inelastic, or not dependent on price.
The association cited Constellation Energy’s deal with Microsoft to re-open Unit 1 of the Three Mile Island nuclear plant in Pennsylvania as an example. Analysts, according to the association, reported Microsoft is able to pay $115 per MWh.
Aluminium smelters are unable to compete at those prices, with prices near $40 per MWh for ten years being required to operate, the association said.
“Aluminium is connected to energy, it’s the most important input,” Michael McKenna, president of MWR Strategies, told market participants at the Aluminum Association’s annual meeting.
“That’s the same argument that Jensen Huang over at Nvidia makes about chips. He’s said this multiple times, ‘the only thing that’s going to limit our ability to make money on AI is how much energy can we get to it,’” McKenna said.
Huang is the president and chief executive officer of American technology company Nvidia.
Part of Trump’s policy agenda is to “unleash” affordable and reliable energy and natural resources.
On the campaign trail, Trump’s rally for energy was “drill, baby, drill.” In other words, to expand US natural gas production.
“I think what you’re going to see is the administration … will accelerate the approval of pipelines, to the extent that they can,” McKenna said.
But clean energy proponents point out that Trump’s signature policy, the One Big Beautiful Bill Act, rolls back Inflation Reduction Act tax incentives for solar and wind energy.
Solar advocates are concerned that the phase-out of solar incentives will “[surrender] the 21st-century technology race to China” and weaken US industries.
“Federal programs like the Inflation Reduction Act — which the Trump Administration is trying to dismantle — had created major opportunities for investments in renewables and technology upgrades that could cut costs and emissions, making American aluminium more competitive,” Sartor said.
“Relying primarily on fossil fuels locks in high pollution and volatile power costs, whereas integrating more clean power is proven to lower both emissions and long-term price volatility for manufacturers,” Sartor said.
Aluminum production accounts for about 2% of global greenhouse gas emissions, according to Sartor. Switching to renewables and innovative tech can cut pollution substantially, benefiting the environment and the health of communities near production sites.
The Trump administration will try to accelerate the approval of nuclear power, specifically small modular reactors, to meet energy demand, McKenna said
As energy demand is expected to increase due to electrification, data center growth, electric vehicle (EV) adoption and industrial applications, some market participants have discussed small modular nuclear reactors as a solution to power data centers.
Proponents argue that nuclear is a reliable source of clean energy, that unlike solar or wind, is not dependent on weather patterns.
“I think everyone underestimates how complicated it is to build a reactor. No matter what you build, the next thing you build will be the first of a kind,” McKenna said, who worked in the administration of former US President George W. Bush as well as that of Trump.
Richard Rast, CEO of US-based polysilicon producer Highland Materials, expressed skepticism about small modular nuclear reactors. Rast said significant development is “probably going to take a decade.”
Nuclear has been used to power primary aluminium production previously: EGA announced the production of low-carbon aluminium powered by the UAE’s Barakah Nuclear Energy Plant in early August.
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