US Aluminum Smelters Battle Big Tech for Limited Power

As the United States accelerates its transition to a greener economy, a new challenge has emerged: aluminum smelters are struggling to secure affordable electricity amidst growing competition from energy-intensive tech industries. According to a recent Reuters analysis by Andy Home, this power crunch is hindering efforts to rebuild domestic aluminum production capacity, with significant implications for global supply chains, including the metal packaging sector.

The Power Struggle: Aluminum vs. Big Tech

Historically, the U.S. boasted 33 primary aluminum smelters in 1980. Today, only six remain, with just four operating at full or partial capacity. High electricity costs and the emergence of data centers, cryptocurrency mining, and AI computing hubs have intensified the competition for power. While aluminum smelters require stable, long-term electricity rates—ideally under $40 per megawatt-hour (MWh) over 20 years—tech giants are willing to pay significantly more, up to $115 per MWh, making it challenging for smelters to compete. 

Challenges Facing U.S. Aluminum Producers

Century Aluminum's Hawesville plant in Kentucky, once a significant domestic producer, was idled in 2022 after electricity bills tripled. Similarly, Alcoa's Intalco Works in Washington State has remained shut for years due to power cost issues. Even new ventures, such as Emirates Global Aluminium’s proposed Oklahoma plant and Century Aluminum's federally supported project, are hindered by the lack of competitively priced long-term power contracts. 

The U.S. Department of Energy has awarded Century Aluminum $500 million under the Infrastructure Law and Inflation Reduction Act to develop a "Green Aluminum Smelter Project." However, the project has yet to secure a committed renewable energy source, a critical requirement for its classification as a green initiative. 

Recycling: A Viable Alternative

Given the challenges of establishing new smelters, the industry is turning to recycling as a pragmatic alternative. Recycling aluminum consumes only 5% of the energy required for primary production. However, the U.S. faces limitations due to low domestic recycling rates and high scrap exports. Improving scrap recovery could strengthen the supply chain more quickly and economically than building new smelters. 

Implications for the Metal Packaging Industry

The power struggles and production challenges in the U.S. aluminum industry have broader implications for the global metal packaging sector. As aluminum becomes more scarce and expensive, industries reliant on metal packaging, such as food, cosmetics, and giftware, may face increased costs and supply chain disruptions.

This situation underscores the importance of diversifying material sources and considering alternatives like tinplate, which offers comparable sustainability benefits and lower energy intensity in production. Tinplate packaging is known for its recyclability, durability, and food-grade safety, making it a viable and attractive alternative to aluminum.

Conclusion

The competition for electricity between aluminum smelters and tech industries in the U.S. highlights the need for strategic planning in energy allocation and industrial policy. For the metal packaging industry, this serves as a reminder to explore alternative materials and invest in recycling infrastructure to mitigate potential disruptions in the supply chain.