Historical US primary aluminium production peaked at 4.7Mtpa in 1980 and accounted for around 30% of global supply. Since the peak, production has dramatically declined, with 2022 production currently forecast at 0.92Mt and ~1.3% of global production.
Remaining US smelting capacity is at risk from a
combination of older technology and uncompetitive power costs. While US trade
policies saw the restart of some capacity, the long-term future of the US
domestic smelting industry remains uncertain.
The Current
Situation for US Primary Aluminium
US primary aluminium production has been in decline
for decades. Rising power costs have made it increasingly difficult for US
producers operating largely outdated reduction technology to compete with
semi-finished imports and a rising secondary aluminium supply. There have been
limited upgrade or replacement programmes initiated for curtailed primary
smelters within the US over this time.

Following an election campaign promising the
restoration and strengthening of US manufacturing capability and subsequent
implementation of protectionist policies affecting aluminium imports, some
smelting capacity was restarted. Though some of this has more recently been
undone.
Both Alcoa’s Warrick and Century Aluminum’s Hawesville smelters
announced capacity curtailments accounting for ~300ktpa of production. Demand will
continue to significantly exceed supply in the US.
While some US demand will be
met by rising domestic scrap recovery and re-use, the country will continue to
rely on imports leaving downstream producers exposed to domestic price impacts of
import tariffs.
Historical
US Aluminium
In 1945, at the end of World War II, the United States
accounted for over half the global production of primary aluminium, producing
450kt after a wartime peak of 834kt in 1943. Total US production volume peaked
in 1980 at 4.7Mt but had fallen to ~30% as a proportion of global production.
Since this peak, production has continued declining, reaching ~800kt in
2017—equivalent to less than 2% of global production. These reductions have followed
the large increases in Chinese capacity and the development of smelters in
regions such as the Middle East which benefit from lower energy costs and
utilising much more recent and energy-efficient technology.
The number of operational domestic smelters has fallen
from 23 sites in 1993 to essentially eight in 2022, however, this includes the
Intalco and Wenatchee smelters both of which Alcoa has announced the closure of
but are yet to be demolished.
Hope is currently still held for a restart of the
280ktpa Intalco smelter should a viable green-power purchase agreement be secured—to
secure a place in the Energy Transition—potentially under a different owner.

Since 2012, primary aluminium production in the US has
continued despite demand increasing. This has created a loss in production
self-sufficiency and intensified reliance on imports of primary metal,
primarily from Canada but increasingly Russia—a currently risky exposure, but a
source of green aluminium—and the UAE, all of which are currently impacted by
the import tariffs.
Despite demand for aluminium in the US continuing to
rise, remaining smelters continue to suffer from a combination of old, less-efficient
technology and ever-increasing power supply costs.
The global energy crisis is
currently exacerbating the situation and efforts to decarbonise will see several
smelters—particularly those located in the Midwest and South of the country—face
further struggles given their reliance on coal-powered electricity.

The
National Security Angle
The 2016 electoral campaign of the US President
included promises to resurrect the domestic manufacturing industries and
commitments to policies designed to overcome competition from allegedly unfair
imports.
US Government departments enquired into dumping and anti-competitive
practices in the global aluminium and steel industries—such as current export
tariff levels and subsidies—with an unstated focus on China. Specifically, the
President requested the US Department of Commerce to investigate aluminium
imports and their potential to pose a threat to national security.
With an
affirmative finding, the President imposed tariffs of 10% on aluminium imports, including to the US’s largest supplier, Canada. The initial imposition of these
tariffs saw Century Aluminium restart idled production at its 244ktpa
Hawesville smelter, Alcoa restart capacity at the 270ktpa Warrick smelter and new
owner Magnitude 7 Metals restart capacity at the 270ktpa New Madrid smelter it
had purchased in 2016.
Energy
costs and US Smelter Viability
Smelters in the US were historically developed in
regions with access to cheap power, such as those near hydroelectric sources in
the Pacific Northwest and New York State and coal power in the Appalachian
region.
Within the US, the emergence of private monopoly power suppliers in
many states lead to increased power tariffs and supply costs, which, combined
with comparatively less-efficient reduction technology, has rendered many
smelters in the country globally uncompetitive.
The government initiatives encouraging the restart of
available capacity have resulted in the additional aluminium production being
comparatively expensive and have seen price rises for domestic customers and
consumers further down the supply chain, including the US Government—a large consumer
of aluminium and its products.
While developed with cutting-edge technology of their
time, there are no US smelters operating at an amperage of over 300kA, with
limited capacity operating over 200kA.
Comparatively, Chinese smelters are predominantly
less than 10 years old with limited capacity under 300kA and undertake
progressive replacement of older capacity with more modern technology—now
exceeding 500kA. Integrating large captive power sources further improves the
cost position of Chinese smelters against the US.
Energy
Key to Capacity Development
In the long term, the efficiency and environmental
benefits of constructing modern cell technology to replace outdated
installations are likely to be more beneficial than the potentially expensive
and short-lived upgrade of existing cells. In either case, energy supply costs
are critical.
Hydroelectric power sources will continue to be more favourable
in terms of generated electricity cost as well as community environmental
perceptions and global shifts toward decarbonisation.
Focus may turn to the generation
of electricity from cheap gas from more recent shale extraction developments or
acceptance of developing newer and more-efficient dedicated power supplies near
coal basins for cheap electricity generation—however, this shift would be muted
by the Green Transition.
The US has committed to reach net-zero by 2050 and has
submitted an NDC 2030 target of reducing emissions 50-52% below 2005 levels.
The target is economy wide, covering all sectors, and all greenhouse gases.
Under the November 2021 administration’s Infrastructure Investment and Jobs
Act’ includes investments in EV charging infrastructure, upgrading the power
grid, and improving energy efficiency and electrification in buildings—all of
which will drive further demand for aluminium.
However, additional and
complementary policies including the ‘Build Back Better’ bill are likely to be
held up in the Senate—and likely to be scaled down to secure passage. A recent
Supreme Court ruling also places the ability of the federal government to force
emissions reduction efforts at risk.
Over 2021, the US increased total CO2 equivalent emissions
by 6.2% to 5.2Gt. This has come off a covid-induced economic slowdown which saw
a drop over 2020—meeting the US’s targets under the Copenhagen Accord. The 2021
bounce back sees emissions still below 2019 levels.
To meet its decarbonisation commitments, any
greenfield smelter development in the US—however unlikely—is expected to need
to be able to source its power requirements from renewable sources. As the
world undertakes its decarbonisation efforts, developments which increase emissions
will struggle to be approved.
Further, the customer base looking to lower
emission intensity of their value chain is forcing changes. demand for ‘green’ aluminium.
As previously mentioned, any potential restart of Intalco will necessitate securing
power from renewable sources. It could also see an increased focussed on the
development of recycling capacity and increased domestic aluminium from scrap sources
as opposed to new primary capacity.
Cheap
supply, or domestic production
While the US’ protectionist measures provided some
incentive to restart and modernise limited domestic capacity, little has been
seen of any meaningful progress towards developing significant new primary
production capacity in the US. Though the impost of tariffs has seen local
prices increase, to the detriment of downstream producers.
Currently, the largest sources of primary aluminium
imports to the US are provided by hydroelectric-powered smelters in Canada.
These projects, including the recent modernisation of Rio Tinto’s Kitimat
smelter, the planned, but yet to be undertaken replacement of older capacity
with ultra-modern
AP60 cells at Rio Tinto’s Arvida smelter and the potential expansion
of the Alouette smelter, may provide a reliable, close proximity supply of
primary aluminium to help satisfy the US’ demand.
To secure a viable domestic aluminium smelting
industry in the US, major upgrades of the existing reduction cells are considered
unlikely. These would not necessarily create long-term competitive
installations given the established global technology footprint.
Further, any
development of a greenfield smelter within the US, which would consider value
chain integration, availability of low-cost and green energy sources as well as
adequacy of scale for global competitiveness, may come at a potentially
prohibitive capital cost.
With close and reliable supply from neighbouring
Canada, including a higher likelihood of hydro-powered expansion opportunities
and a globally well-supplied aluminium market with more-cost-effective short-
and medium-term projects already in progress, imported aluminium may prove more
cost effective in the short-term.
Development of new capacity in the US is only
considered a long-term prospect, potentially incentivised on National Security
grounds.
