In recent years, the rapid growth of metal-intensive technologies such as artificial intelligence (AI) data centers and electric vehicles has led to an increase in demand for aluminum, driving aluminum prices to near three-year highs. However, aluminum smelting is extremely energy-intensive, and while data centers are willing to pay higher electricity prices, this has made it difficult for U.S. aluminum plants to afford the power costs needed to expand production capacity.
The United States is experiencing a rapid increase in electricity demand. Large tech companies are constructing data centers, causing electricity prices to continue to rise, and smelting plants are unable to compete with tech giants to secure long-term low electricity price contracts. Each ton of aluminum production requires approximately 14 megawatt-hours of electricity, further exacerbating cost pressures.
At the same time, overseas competition is intensifying. With Indonesia and China accelerating the expansion of aluminum ore processing and smelting capacity, they are further squeezing the U.S. market. Currently, the United States has only six smelting plants, with only four of them operational. In 2024, production accounted for less than 1% of the global output, with about two-thirds of primary aluminum needing to be imported from Canada.
Strong sources of aluminum demand include data center servers and cooling systems, solar panels, wind power equipment, power transmission infrastructure, and electric vehicles. Industry insiders point out that the demand from AI is driving up aluminum usage significantly, but smelting plants are struggling to obtain enough electricity to expand production.
Industry executives have stated that aluminum plants need a long-term electricity price of $30-40 per megawatt-hour to maintain profit margins, but tech companies are willing to pay over $100, putting pressure on aluminum plants in the electricity market.
U.S. businesses and the White House have begun discussions on rebuilding the domestic aluminum supply chain, but this would require substantial investment, government cooperation, and several years of planning. Industry estimates suggest that meeting the demand in the U.S. would require five years, five new smelting plants, and $25 billion in funds.
While Emirates Global Aluminium plans to build a new plant in the U.S. and Century Aluminium is preparing to restart some production capacity, electricity supply remains a major bottleneck. Analysts predict that aluminum prices may decline before 2026, making profitability in the smelting industry even more challenging.
Overall, while the AI era is boosting aluminum demand, the skyrocketing electricity needs of data centers are actually hindering the recovery of the U.S. aluminum smelting industry. The domestic aluminum supply still heavily relies on imports, making it difficult to reverse the trend in the short term.