The aluminium market is increasingly being shaped by power systems rather than feedstocks or headline capacity additions. The key divergence lies in how China is building electricity resilience, compared with how the U.S. and Europe are attempting to manage rising demand alongside carbon policy and industrial competitiveness. This difference is creating a growing gap between theoretical supply growth and metal that can actually be delivered into end markets, which helps explain the wide dispersion in aluminium price and balance forecasts for 2026.
China’s solution: treat electricity as strategic infrastructure, then move the load
China has pursued a pragmatic power-system build-out, concentrating renewable generation where resource quality and land availability are strongest, primarily in western provinces. This has been the lowest-cost way to add large volumes of wind and solar capacity quickly. Crucially, these projects have not been treated as stand-alone solutions. China has reconciled a high-renewables system with the need for supply stability by pairing renewable build-out with dispatchable capacity, often coal, to maintain grid reliability and allow the system to expand.
Transmission investment and industrial policy complete the loop. Ultra-high-voltage lines move electricity toward eastern demand centres, while policy simultaneously nudges energy-intensive industry westward to reduce curtailment by better matching generation with demand at the point of production. For aluminium, this preserves the viability of primary production at scale by anchoring smelting to a power system designed with redundancy. Carbon intensity improves unevenly, but the system remains operational under stress. The strategic priority is industrial continuity, even at the expense of imperfect emissions outcomes in the near term.
Europe’s approach: decarbonise through regulation, accept that high power costs constrain capacity
Europe’s aluminium constraint is less about the physical availability of power and more about long-term affordability and price stability for industry. When electricity prices are structurally high or volatile, smelters curtail or close, and once capacity is lost it does not return easily. CBAM reinforces a second constraint by filtering which imports are economically viable and administratively acceptable. This is directionally supportive for low-carbon metal, but it also reduces the available pool of supply during periods of market tightness.
The U.S. approach: use trade policy and price signals, while the power bottleneck remains unresolved
The implicit goal of current U.S. administration policy is industrial revival, but the binding constraint for primary aluminium remains long-dated access to power at a competitive price. Rising physical premiums and tariffs may improve project economics on paper, but aluminium supply does not respond over short cycles. Affordable, long-term power contracts and sufficient grid capacity are non-negotiable prerequisites and must be secured before industrial commitments can be made.
This is where the U.S. differs structurally from China. In both systems, electricity demand is rising from multiple competing sources, including data centres, electrification, and strategic manufacturing. The divergence lies in how those demands are absorbed. In the U.S., capacity expansion is constrained by fragmented governance, permitting friction, and investment uncertainty, which slows the alignment between new load and new generation. While some of these obstacles are targeted for reform, the result is that power constraints can persist long enough for market tightness to become a structural feature
What this means for new smelting capacity in North America and allies
If you apply a smelter viability checklist, the conclusion is not that new capacity is impossible, but that it will concentrate in a narrow set of places and structures.
The most plausible restarts and additions are limited to cases where long-dated power certainty can be secured upfront, typically in narrowly defined, structurally advantaged settings rather than through broad system expansion. In practice, this means legacy-linked power arrangements, highly localised grid advantages, or bespoke contracts where political and regulatory support is durable. Any project that depends on major new generation, new transmission, or contested permitting quickly becomes multi-year in scope and vulnerable to delay.
As the U.S. seeks secure aluminium supply, the most practical route appears to be a blend of selective domestic capacity and allied sourcing from jurisdictions with abundant, stable power systems and a demonstrated willingness to host energy-intensive processing. This approach is less ideologically driven than Europe’s and more narrowly focused on comparative advantage in power. Canada remains the most obvious partner, although the durability and direction of that relationship increasingly represent a strategic dependency for the U.S. rather than a guaranteed solution.
Reconciling this with bearish 2026 supply forecasts
This goes some way to explaining why price-positive forecasts can sit comfortably alongside bearish supply-and-demand calls for 2026. Global tonnage assumptions, predicated on Chinese production operating broadly around its stated cap, incremental non-China supply from jurisdictions such as Indonesia, and moderate demand growth, make a compelling case for oversupply into H2 and next year. Taken together, these inputs can produce a surplus on paper.
But the market ultimately clears on deliverable tonnes, and deliverability is increasingly shaped by power availability, carbon compliance, trade friction, logistics, and broader trade policy. Metal can exist comfortably within the global system while remaining economically unavailable or practically unusable in specific markets.
The probable risk sits with the regions expected to deliver incremental supply, particularly Southeast Asia and parts of the Middle East, where headline capacity growth is often predicated on assumptions of cheap or abundant energy that have yet to be tested at scale under carbon compliance, power stability, and infrastructure constraints. Metal that exists on paper may not translate into material supply for more stringent markets. Shifting priorities around power deployment could also emerge more quickly than expected.
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