Nearly half of Europe's aluminum capacity has been cut over the past two years as electricity prices have slashed profits for all but the lowest-cost producers. But the shutdowns continue despite decreasing electricity prices. Prices have failed to recover from a sharp decrease that began a year ago, despite the shutdown of all capacity.
Since the end of 2021, European smelters have reduced their annual aluminum capacity by more than 1 million tons due to high electricity prices. Average monthly wholesale electricity prices peaked in August last year and in some cases were 10 times higher than two years ago.
Despite the decrease in electricity prices, producer margins have still been inadequate. Electricity prices in Europe are still three times higher than two years ago. Aluminum prices have not recovered enough, if at all, to maintain producers' profit margins.
The recent cuts in European aluminum production may have less to do with electricity prices and more to do with the structural shift of primary production eastwards.