Can America smelt again?

Challenges Facing America's Aluminium Smelting Revival

The United States once dominated global aluminium production, with vast smelting operations powering America's industrial might. Today, that dominance has crumbled. Rising energy costs and fierce international competition have decimated domestic capacity, leaving America increasingly dependent on foreign suppliers for this critical metal. 

Two ambitious greenfield projects promise to reverse this decline. Century Aluminium and Emirates Global Aluminium have announced multi-billion-dollar smelting facilities, targeting combined capacity of over one million tonnes annually. Yet fundamental questions remain about their economic viability in America's challenging energy landscape. 

Our latest analysis examines whether these projects can succeed where others have failed. Our research reveals the stark realities facing new aluminium capacity: soaring power costs, intensifying competition for energy resources, and the urgent need for substantial government support. The findings illuminate broader challenges confronting America's energy-intensive industries and the policy interventions required to maintain domestic manufacturing capabilities.  

Rising energy costs threaten America's aluminium independence

The United States aluminium industry faces an unprecedented crisis. Domestic primary aluminium production has plummeted from 1.6 million tonnes to 700,000 tonnes over the past decade - a dramatic 57% decline that threaten's America's industrial base.

The deterioration stems from rinsing energy costs and ageing infrastructure. Operating smelters have dropped from eight to four facilities. WIthout immediate intervention, the US will require approximately 90% of its aluminium demand from foreign sources by 2040.

Economic viability under scrutiny

Wood Mackenzie conducted a comprehensive "ability to pay" analysis to determine economic viability thresholds for new US aluminium smelting operations. The analysis employed financial modelling incorporating target Internal Rate of Return parameters, Net Present Value calculations, and payback period requirements.

The study examined two announced greenfield projects. Cetury Aluminium's proposed facility in Ohio and Emirates Global Aluminium's planned smelter in Oklahoma both targets approximately 500,000-700,000 tonnes per annum capacity. Projected investments reach US$4 billion with operational timelines around 2030. Our analysis highlights a critical constraint: energy costs determine viability. To achieve attractive returns, power prices must fall well below current industrial rates, or market premiums must rise far above historical norms. The gap raises fundamental questions about competitiveness and supply security.

Competition intensifies for power resources

The analysis identifies intensifying competition for power rsources as data centres and other high-demand industries enter the market. These sectors often accept premium rates and shorter contract terms than traditional industrial users like aluminium smelters.

US power demand is projected to grow at a compound annual growth rate of approximately 2% through 2040. Data centre expansion primarily drives this growth, fundamentally reshaping utility priorities and increasing competition for long-term power access.

This shift creates additional challenges for energy-intensive industries. Aluminium smelters require stable, long-term power contracts to justify massive capital investments. However, utilities increasingly favour flexible arrangements with higher-paying customers.

Policy support proves essential

Successful greenfield aluminium smelting requires substantial government support through:

• Power subsidies and direct grants
• Tax incentives and strategic tariffs
• Long-term utility partnerships

Century Aluminium has already secured up to US$500 million from the US Department of Energy's Inudstrial Demonstrations Program. EGA has obtained approximately US$270 million in direct state funding plus additional tax incentives. However, these support levels may prove insufficient given the fundamental economic challenges identified in the analysis.

The broader implications extend beyond individual projects. America's industrial competitiveness depends on maintaining domestic production capabilities in strategic secotrs. Aluminium represents a critical input for aerospace, automotive, and defence industries.

Looking ahead

The path forward requires coordinated action across multiple stakeholders. Government policy must address structural disadvantages facing energy-intensive manufacturing. Utilities need incentives to provide long-term, competitively priced power contracts. Industry must demonstrate commitment through substantial private investment.

The path forward requires coordinated action. Without decisive intervention, America risks losing remaining production capacity, affecting supply chain resilience and national security.

The question remains whether America can rebuild its aluminium smelting industry. The answer will shape the country's industrial future for decades.

Learn more

Wood Mackenzie's analysis quantifies power price thresholds for project viability and examines competitive dynamics reshaping America's energy landscape.

Access the full report here or fill out the form at the top of the page to speak with a member of our expert Metals & Mining Consulting team.