Europe's Aluminum Production Collapse Sparks Crisis for Key Industries
- The high-strength aluminum alloys market is projected to reach $115.29 billion by 2030, but the industry currently faces structural scarcity due to a massive gap between supply and demand.
- European primary aluminum production has collapsed by over 25% since 2010, resulting in a 93% structural deficit, primarily because high energy prices have forced smelters like Slovalco to shut down.
- Western supply chains for essential aerospace and defense alloys are vulnerable to Chinese export controls on critical "vitamins" like magnesium and face challenges in using recycled scrap due to chemical limitations.
The global high-strength aluminum alloys market is projected to surge from $66.01 billion in 2025 to $115.29 billion by 2030, according to new data. While this 11.8% compound annual growth rate suggests a smooth trajectory for the green transition, a widening gap between downstream demand and upstream reality is creating a period of structural scarcity.
As of January 2026, the industry faces a fundamental "grind" characterized by shuttered European smelters, Chinese export controls on critical minerals, and the implementation of the European Union's Carbon Border Adjustment Mechanism (CBAM).
- The high-strength aluminum alloys market is projected to reach $115.29 billion by 2030, but the industry currently faces structural scarcity due to a massive gap between supply and demand.
- European primary aluminum production has collapsed by over 25% since 2010, resulting in a 93% structural deficit, primarily because high energy prices have forced smelters like Slovalco to shut down.
- Western supply chains for essential aerospace and defense alloys are vulnerable to Chinese export controls on critical "vitamins" like magnesium and face challenges in using recycled scrap due to chemical limitations.
The global high-strength aluminum alloys market is projected to surge from $66.01 billion in 2025 to $115.29 billion by 2030, according to new data. While this 11.8% compound annual growth rate suggests a smooth trajectory for the green transition, a widening gap between downstream demand and upstream reality is creating a period of structural scarcity.
As of January 2026, the industry faces a fundamental "grind" characterized by shuttered European smelters, Chinese export controls on critical minerals, and the implementation of the European Union's Carbon Border Adjustment Mechanism (CBAM).
The European Production Collapse
The European Union (EU) currently consumes 13.5 million tons of aluminum annually to feed its automotive, aerospace, and construction sectors. However, domestic primary production has collapsed to just 950,000 tons—a 93% structural deficit.
Since 2010, primary aluminum production in Western and Central Europe has fallen by over 25%, leaving the continent effectively de-industrialized in terms of upstream capacity.
"Europe needs roughly six to seven million tons of production; everything else is imported," said Slovak Prime Minister Robert Fico, who is currently pushing for the restart of the Slovalco smelter. "This [Slovalco] plant was one of the technical and environmental leaders in Europe.”
The Slovalco facility, which once produced 175,000 tons annually, remains a symbol of the energy crisis. Norsk Hydro ASA shuttered the plant because high electricity prices made smelting, which requires 13 to 15 megawatt-hours (MWh) per ton, mathematically impossible.
While Fico has proposed a 10-year support framework and a €100 million investment to restart the pots, the technical reality is daunting. Once a potline freezes, the electrolyte bath hardens like granite, requiring a massive capital expenditure to reline the pots.
The European Union (EU) currently consumes 13.5 million tons of aluminum annually to feed its automotive, aerospace, and construction sectors. However, domestic primary production has collapsed to just 950,000 tons—a 93% structural deficit.
Since 2010, primary aluminum production in Western and Central Europe has fallen by over 25%, leaving the continent effectively de-industrialized in terms of upstream capacity.
"Europe needs roughly six to seven million tons of production; everything else is imported," said Slovak Prime Minister Robert Fico, who is currently pushing for the restart of the Slovalco smelter. "This [Slovalco] plant was one of the technical and environmental leaders in Europe.”
The Slovalco facility, which once produced 175,000 tons annually, remains a symbol of the energy crisis. Norsk Hydro ASA shuttered the plant because high electricity prices made smelting, which requires 13 to 15 megawatt-hours (MWh) per ton, mathematically impossible.
While Fico has proposed a 10-year support framework and a €100 million investment to restart the pots, the technical reality is daunting. Once a potline freezes, the electrolyte bath hardens like granite, requiring a massive capital expenditure to reline the pots.
The Critical Mineral Chokehold
The growth of high-strength alloys is tied to the 7xxx and 5xxx series, which are essential for aerospace and defense. These alloys require "vitamins" like magnesium and zinc.
China currently controls approximately 95% of global magnesium production, creating a single point of failure for Western supply chains. Without magnesium, the production of Aluminum 5083 armor plate for military vehicles ceases.
Zinc, the primary strengthening agent for the 7xxx series, is also under pressure. London Metal Exchange (LME) stocks dropped to critically low levels in late 2025, representing less than one day of global coverage. While a surplus is projected for later in 2026 as new mines in Portugal and Idaho come online, the market remains volatile.
The growth of high-strength alloys is tied to the 7xxx and 5xxx series, which are essential for aerospace and defense. These alloys require "vitamins" like magnesium and zinc.
China currently controls approximately 95% of global magnesium production, creating a single point of failure for Western supply chains. Without magnesium, the production of Aluminum 5083 armor plate for military vehicles ceases.
Zinc, the primary strengthening agent for the 7xxx series, is also under pressure. London Metal Exchange (LME) stocks dropped to critically low levels in late 2025, representing less than one day of global coverage. While a surplus is projected for later in 2026 as new mines in Portugal and Idaho come online, the market remains volatile.
Aerospace Backlogs and the "Buy-to-Fly" Ratio
Despite the shift toward carbon-fiber composites in models like the Boeing 787, the aerospace industry remains a primary floor for aluminum demand. The current backlog for Airbus and Boeing exceeds 14,000 aircraft. At current rates, Airbus has 11 years of production already sold.
Every narrow-body wing requires massive plates of 7150 or 7055 aluminum. This creates extreme pricing power for converters like Constellium SE, which recently reported a 61% increase in profitability per unit of metal.
Unlike upstream producers like Alcoa Corporation, which is cutting capital expenditures to $625 million, downstream converters are insulated from raw energy costs and are successfully capturing margins from the aerospace backlog.
Despite the shift toward carbon-fiber composites in models like the Boeing 787, the aerospace industry remains a primary floor for aluminum demand. The current backlog for Airbus and Boeing exceeds 14,000 aircraft. At current rates, Airbus has 11 years of production already sold.
Every narrow-body wing requires massive plates of 7150 or 7055 aluminum. This creates extreme pricing power for converters like Constellium SE, which recently reported a 61% increase in profitability per unit of metal.
Unlike upstream producers like Alcoa Corporation, which is cutting capital expenditures to $625 million, downstream converters are insulated from raw energy costs and are successfully capturing margins from the aerospace backlog.
Regulatory Arbitrage and the Green Ledger
The industry is now navigating a two-tier market of "dirty" versus "green" aluminum. As of Jan. 1, 2026, the EU’s CBAM began imposing a carbon levy on imported metals. This creates a paradox: Europe has shut down its own low-carbon smelters due to energy costs, but it will now tax the carbon-intensive imports required to replace that lost production.
While recycling is often cited as a solution, high-strength alloys face a chemical limit. Scrap often contains iron, which forms brittle needles in the metal. This makes most recycled aluminum unsuitable for critical aerospace components, leaving the industry dependent on primary smelting.
The transition to a $115 billion market is not just a matter of demand, but a challenge of conversion capacity and clean energy. Until the gap between European consumption and production is addressed, the sector’s "strategic autonomy" remains precarious.
By Charles Kennedy for Oilprice.com
The industry is now navigating a two-tier market of "dirty" versus "green" aluminum. As of Jan. 1, 2026, the EU’s CBAM began imposing a carbon levy on imported metals. This creates a paradox: Europe has shut down its own low-carbon smelters due to energy costs, but it will now tax the carbon-intensive imports required to replace that lost production.
While recycling is often cited as a solution, high-strength alloys face a chemical limit. Scrap often contains iron, which forms brittle needles in the metal. This makes most recycled aluminum unsuitable for critical aerospace components, leaving the industry dependent on primary smelting.
The transition to a $115 billion market is not just a matter of demand, but a challenge of conversion capacity and clean energy. Until the gap between European consumption and production is addressed, the sector’s "strategic autonomy" remains precarious.
By Charles Kennedy for Oilprice.com
Column: US aluminum consumers pay the spiraling cost of tariffs
American aluminum buyers are now paying an eye-watering 68% premium over the London Metal Exchange (LME) price to get physical metal.
This is of course a direct of result of US President Donald Trump hiking import tariffs from 10% to 25% in March and again to 50% in June.
But the premium for physical delivery in the US Midwest is trading another $560 per metric ton over any implied tariff cost, propelling the “all-in” price of aluminum above $5,000 per ton.
The country is clearly running short of a metal used across a wide array of industries from automotive and aerospace to construction and packaging.
On paper, the record premium for US delivery should attract much-needed supply. In reality, however, things may not be that simple.
Imports down, stocks shrink
Tariffs were meant to stimulate domestic primary aluminum production after a prolonged period of decline which left just four operating smelters.
The immediate impact has been limited to Century Aluminum’s restart of 50,000 tons of idled capacity at its Mt. Holly plant in South Carolina. The smelter will return to full capacity by June.
There are a handful of greenfield projects but these are several years away from producing first metal, even assuming they can compete with Big Tech for long-term power supplies.
In the interim, the US remains dependent on imports of primary metal and these have been falling. Volumes were down by 14% in the first 10 months of 2025 relative to 2024.
Canada, historically the largest supplier to the US market, started diverting shipments to Europe around May last year.
It exported 225,000 tons to the Netherlands, 89,000 tons to Italy and 29,000 tons to Poland between May and October, according to the World Bureau of Metal Statistics.
US stocks of primary metal have been sliding.
The short time-lag between tariff hikes didn’t allow for much preemptive stockpiling and in-country inventory has shrunk from 750,000 tons at the start of 2025 to below 300,000 tons, according to consultancies Harbor Aluminum and Wittsend Commodity Advisors.
The elevated US premium is a red warning light that the country needs more aluminum.
Cross-Atlantic competition
The problem for US buyers, however, is that Europe is also short of aluminum. European duty-paid premiums have surged from under $200 per ton over LME cash in June to over $340 per ton.
The region is being squeezed by a triple supply hit.
South32’s decision to mothball the Mozal aluminum smelter in Mozambique due to high power prices removes a key supplier to the European market.
Another core supplier, the Grundartangi smelter in Iceland, owned by Century Aluminum, cut production by two-thirds in late October due to equipment failure. It will take an estimated 11-12 months to recover fully.
Meanwhile, imports of Russian metal are set to be fully switched off this year in line with the European Union’s 16th sanctions package. European buyers were granted a one-year phase-out grace period which expires next month.
Rising local premiums are also being underpinned by Europe’s Carbon Border Adjustment Mechanism (CBAM), which came into effect this month, lifting the price of imports with higher carbon footprint.
Capped supply
In times gone by, traders would simply have bought up LME stocks and shipped them to the United States to profit from the premium spike.
However, Russian metal accounts for a significant part of LME registered tonnage, 58% as of the close of December, and cannot be imported to the US because of sanctions.
Moreover, there is much less aluminum sitting in LME warehouses than in the past, when the global market was characterized by persistent oversupply.
Total LME inventory, both registered and stored in the off-warrant shadows, closed 2025 at 669,000 tons, down by 331,000 tons on the start of the year.
That speaks to the structural shifts that are playing out in the global market.
Chinese operators are now running close to the government’s mandated capacity cap, meaning the world’s largest producer is at or very close to peak output
Chinese production growth slowed from 4% in 2024 to 2% last year, according to the International Aluminium Institute.
Yet smelter margins have been highly profitable. While the aluminum price has been rising, that of intermediate product alumina has cratered. It’s the sort of combination that would once have triggered a rush of new and restarted capacity but not any more.
China is also importing ever more primary metal. Inbound volumes rose by 19% year-on-year in the first 11 months of 2025. A significant portion came from Russia, which has pivoted away from Western buyers due to sanctions.
China’s exports of semi-manufactured products, by contrast, fell by 11% over the same period, reflecting the removal of the tax rebate on outbound shipments in December 2024.
The global market is tightening, a process that is complicated by the simultaneous fracturing of pricing between regions.
Flow-through
Were the tariff impact on US pricing playing out in isolation, it would be quickly resolved by physical arbitrage.
But it’s not. There are multiple moving parts in the physical aluminum market and right now they are serving to tighten supply just about everywhere.
The elevated cost of aluminum in the US could prove sticky, which is bad news for the ultimate consumer.
The Trump administration’s extension of 50% tariffs to a wide spectrum of aluminum products in August has kept midstream processors onside but serves to accelerate the flow-through of higher primary metal pricing to the ultimate buyer.
US consumers are in for a shock unless imports pick up soon.
(The opinions expressed here are those of the author, Andy Home, a columnist for Reuters.)
(Editing by Marguerita Choy)
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