ROI-Power trumps tariffs as another US aluminium smelter shuts: Andy Home

By Andy Home

LONDON, Feb 18 (Reuters) - U.S. import tariffs haven't been enough to stop the United States losing another aluminium smelter, leaving the country with just five primary metal production plants.

Century Aluminum CENX.O suspended production at its Hawesville smelter in 2022 as energy prices spiked in the wake of Russia's invasion of Ukraine.

The company expected to resume operations within a year once power prices abated. But they didn't, and Century has now sold the Kentucky site to digital infrastructure company TeraWulf WULF.O.

Aluminium smelters are massive users of energy, with a modern plant using more power than a city the size of Boston.

So too are data centers and in the battle for long-term power supply, Big Tech is prepared to pay more.

HALTING THE SLIDE

U.S. President Donald Trump hiked aluminium import tariffs to 50% last year with the stated goal of halting the decades-long slide in domestic primary metal capacity.

The immediate impact has been limited to Century's restart of 50,000 metric tons of annual capacity at its Mount Holly smelter in South Carolina. Tariffs helped, but an extension of the current power supply deal with local energy provider Santee Cooper was arguably more important.

The plant is due to return to near-capacity utilisation of 220,000 tons per year by the middle of 2026.

The future promise is a state-of-the-art greenfield smelter in Oklahoma, a 60:40 joint venture between Emirates Global Aluminium and Century.

The partners have just selected U.S. engineering group Bechtel to prepare preliminary studies for the proposed plant, which would have annual capacity of around 750,000 tons.

Oklahoma has the advantage of producing three times more energy than it consumes. But a power supply deal for the proposed new plant is still pending and even assuming construction can start on schedule by the end of this year, first metal production is likely only in 2030.

LOSS OF CAPACITY FLEX

The permanent closure of Hawesville significantly reduces the amount of remaining idled capacity that could be reactivated to fill the gap in the years before the new Oklahoma smelter comes online.

Hawesville was not only the second-largest remaining smelter in the U.S. with annual capacity of 252,000 tons, but also a significant supplier of high-purity aluminium used in aerospace and defence applications.

Alcoa AA.N still has one 54,000-ton-per-year production line idled at its Warrick facility in Indiana, but seems to be in no rush to restart it.

Reactivation would cost around $100 million and would take a couple of years, "so it's, at this point, unlikely we would restart," Alcoa President and CEO William Oplinger told analysts on the company's Q4 2025 results call last month.

That leaves just the New Madrid smelter in Missouri, which was reactivated in 2018 but closed again in 2024.

Tariffs have rekindled hope that the 263,000-ton-per-year plant could return to life but, as with Warrick, it would be costly and would take time.

Current owner Magnitude 7 Metals has given no indication of its intentions.

NO TARIFF TRUCE

The United States was dependent on imports to meet 60% of internal aluminium consumption last year, according to the U.S. Geological Survey.

That's not going to change much until the Oklahoma smelter transitions from project status to actual production.

And the Trump administration seems to be in no mood to row back on its steep import tariffs.

The White House has dismissed media reports it might lower the tariff rate or grant more exemptions as "baseless speculation".

Trump "will never compromise on re-invigorating the domestic manufacturing that is critical to our national and economic security, especially steel and aluminum production," according to an administration official.

Given the wide array of aluminium products currently subject to tariffs, some tweaks might be made but any wholesale rollback seems highly unlikely.

Which means U.S. aluminium consumers are going to be paying a high price for their metal for the next few years.

The tariff impact on the market is captured by the Midwest aluminium premium, assessed by S&P Global Platts and traded on the CME exchange.

The premium AUPc1 is currently trading at $2,290 per ton over the London Metal Exchange cash price, generating an "all-in" price of $5,300 per ton.

The fact that such a huge premium hasn't been able to save Hawesville says much about the fierce competition with Big Tech for competitively priced power.

And right now AI is still winning out over aluminium.

(Andy Home is a Reuters columnist. The opinions expressed are his own)

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