Aluminium price

The aluminium price is almost directly tied to the price of electricity. Hall–Héroult electrolysis uses about 14 MWh of power to produce one tonne of primary aluminium, making it one of the most energy-intensive metallurgical processes in global industry. Energy accounts for 30–40% of a smelter’s per-tonne production cost. Chinese coal-fired capacity, Canadian and Norwegian hydro power, and European gas and power prices therefore feed directly into LME pricing. European smelters such as Aldel and Slovalco shut down during the European energy crisis because they could not absorb the cost of electricity.

The supply side is dominated by China. Of the world’s roughly 70 million tonnes of annual primary aluminium output, about 40 million tonnes comes from China, or around 58%, mainly from Shandong, Xinjiang and Yunnan provinces. India at about 4 Mt, Russia at about 3.7 Mt through Rusal, the largest producer outside China, Canada at about 3.2 Mt and the United Arab Emirates through EGA at about 2.7 Mt are the other major producers. Sanctions, trade restrictions and LME warrant bans affecting Russian aluminium have built a lasting supply premium into the market. Bauxite mining is led by Australia, Guinea and China.

On the demand side, aluminium use is clearly split by sector: construction ~25% for façade panels, windows, doors and roofing; transport ~25% for lightweight vehicles, aircraft and rail bodies; packaging ~15% for beverage cans and foil; and electrical equipment ~12% for cables and transformers. The rest goes into machinery, durable consumer goods and other uses. The shift to EVs and the expansion of renewable-energy grids structurally increase the share used by the automotive and cable industries. Secondary aluminium needs only about ~5% of the energy required for primary aluminium, so a higher recycling rate, currently around ~33%, also affects smelters’ pricing power.