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“High energy prices and rising inflation will ultimately limit growth in the aluminium market. Demand could even be negatively affected,” a trader told Fastmarkets during the week to Wednesday April 1.
Primary aluminium production typically requires around 14–15 MWh of electricity per tonne, making it one of the most electricity intensive industrial metals, according to the International Aluminium Institute.
“The energy market continues to provide an additional layer of support [to aluminium prices], with elevated oil prices increasing smelting costs and reinforcing the cost floor for aluminium” Fastmarkets analyst Rory Deng said.
LME aluminium price was $3584.50-3585.00 on Tuesday March 31, up from $3290.00-3290.00 on Friday March 27 after the Iranian attack on two of the Middle East’s largest aluminium smelters, owned by EGA and Alba, on Friday.
LME aluminium initially rose to $3519.50-3520.00 on March 13 from $3156.50-3157.50 on February 27 amid early logistical disruptions through the Strait of Hormuz and production curtailments stemming from the conflict.
Global aluminium producer Norsk Hydro reduced output at Qatalum smelter to 60% due to lower gas supply from QatarEnergy.
“We are exposed to the gas market, and the recent disruption has led to significant cost increases. In that environment, we do not want to sell metal at a loss,” a producer said.
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European Aluminium, a group representing more than 100 stakeholders including producers and manufacturers, called on the European Council, made up of the heads of state of all EU member countries, to take “decisive action” on March 19 due to rising geopolitical risks.
“In the long term, the impact is likely to be detrimental, because prices will need to remain high for the next six to 24 months to incentivise countries to build their own supply chains,” Fastmarkets analyst Andy Farida said.
Slovalco in Slovakia, a joint venture between Hydro (55.3%) and Central European investment group Penta Investments Group (44.7%), announced on February 27 the potential restart of primary aluminium production at its smelter in Žiar nad Hronom.
Primary production at the site was halted in September 2022 due to high energy prices.
The smelter previously had total production capacity of 175,000 tonnes per year of primary aluminium, including 75,000 tonnes from its recycling operation, which has continued since 2022.
Multiple European smelters have cut or curtailed output because of high energy prices over the last five years, including Alcoa’s San Ciprián smelter in Spain, which was curtailed in 2021 with a restart delayed until 2026; Aldel’s smelter in the Netherlands, which ceased production in 2021; Uniprom’s KAP smelter in Montenegro and Speira’s Rheinwerk operations in Germany, which shut in 2023.
In addition, South32 placed its Mozal smelter in Mozambique on care and maintenance following failed electricity supply negotiations on March 16, 2026.
Australia has also faced long standing energy supply challenges which have impacted alumina supply.
In 2024, Rio Tinto declared force majeure on alumina cargoes from its Queensland refinery, driven by gas shortages and the continued prioritisation of exports to Asian markets.
Australia is the second largest producer of alumina in the world, with around 15 per cent of global production from five alumina refineries according to The Australian Aluminium Council.
Earlier this month, Rio Tinto secured a $1 billion investment earlier this month after the Queensland and Commonwealth governments agreed to a partnership to support renewable energy powered aluminium production at its Boyne smelter.
The company also extended Bell Bay’s power agreement with Hydro Tasmania by 12 months to allow time to work toward a long-term energy solution in November 2025 and began a consultation over energy supply at its Tomago Aluminium smelter in late October 2025.
Securing low carbon energy for aluminium production has also been front of mind for producers amid pressure from the introduction of the Carbon Border Adjustment Mechanism (CBAM) on January 1.
Market participants previously raised concerns that the introduction of CBAM could push prices higher.
These concerns are heightened by increasing energy prices because the EU Emissions Trading System (ETS) which has historically been closely linked to energy markets.
The Carbon price used under CBAM is based on the price of EU carbon allowances (EUAs) traded in the ETS.
If you want to sanity-check your CBAM exposure assumptions against your supplier mix and routes with our latest EU ETS price modelling, speak with our carbon team.
Despite ETS prices initially decoupling from rising gas prices at the outset of the conflict, concerns are growing over the system’s effectiveness amid higher oil and gas prices and heightened geopolitical tensions.
Hydro announced securing long term electricity contracts with Swiss Utility Alpqiq delivered in Norwegian electricity price area NO3 on Wednesday March 26 to supply 219 GWh of low-carbon electricity between 2031-2039.
The company operates 16 production sites in Norway, including Karmøy, Europe’s largest primary aluminium plant.
Rio Tinto was also reviewing studies to build a greenfield aluminium smelter in Kokkola, Finland, contingent on securing low carbon power, with a final investment decision targeted for the first half of 2027, according to comments made by aluminium and lithium chief executive Jerome Pécresse in November 2025.
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