Uday Patel, senior research manager, Metals and Mining – Aluminium, Wood Mackenzie, has highlighted the complex dynamics currently shaping the aluminium market. He stated that geopolitical disruptions, such as the Russia-Ukraine war and rising political populism, are already weakening global trade and market confidence. Over the past four to five years, interest in low-carbon metal has surged, driven by sustainability goals and regulatory pressures. However, in the current environment of weak overall demand, many end-users are unwilling to absorb the additional costs, particularly when it's difficult to pass those costs on to customers. Looking ahead, Patel notes that the introduction of CBAM (Carbon Border Adjustment Mechanism) payments in 2026 could increase pricing for low-carbon aluminium, but the initial impact may be muted since CBAM currently accounts only for direct emissions. To know more about the European aluminium market, read AL Circle’s exclusive e-Magazine, ‘Aluminium Industry: Focus Europe.’

AL Circle: What is your current assessment of the European aluminium market’s health considering global economic uncertainties? Are there specific sectors within Europe where you see significant growth potential or challenges in the near term?

Uday Patel: The market has certainly faced its fair share of challenges from the RussiaUkraine war, heightened political tensions to a likely scale back on global trade in aluminium amid a swing by electorates to populist governments. All of these are already having an impact on the health of the market. We expect the packaging sector, particularly cansheet, to perform better over the next few years following a period of sub-trend growth. Demand for aluminium in renewable energy applications will also show firm growth, though much will depend on how quickly the European industrial sector can scale up in-region solar and wind manufacturing capacity. Much progress has been made, but more is needed, especially as restrictions on Chinese imports tighten. For automotive, the short-term outlook is clouded by the pullback on EV production volumes amid consumer range anxiety and the slow development of fast charging points. However, we expect better prospects for aluminium demand over the medium term. On the flip side, offtake from the construction sector will remain weak, especially for residential buildings. Still, high interest rates and elevated building costs will remain a feature of the market for some time.

AL Circle: Europe has faced a series of energy crises and elevated energy costs, significantly impacting aluminium producers. How has this trend altered the competitive landscape, and what strategies are producers adopting to mitigate these challenges?

Uday Patel: Over the past few years, producers have further increased operating efficiencies at still-operating smelters across all parts of their operations. We have seen changes in the cast house product mix towards the higher value-added output. Some smelters have optimised their primary to scrap mix in cast house products, while others have been forced to shutter production lines. Meanwhile, downstream producers have increased the intake of scrap, where feasible, and made significant investments in innovative alloys.

AL Circle: With sustainability being a core focus, how has demand for low-carbon aluminium evolved in Europe? What impact do you foresee for the supply and pricing of low-carbon aluminium in meeting Europe’s climate commitments?

Uday Patel: We note that demand for low-carbon aluminium has risen rapidly over the past 4-5 years. However, there is a disconnect between the rising demand for lowcarbon metal and a wholesale willingness to pay higher premiums. Against a weak demand background in the region, there is little appetite for end-use buyers to pay extra, especially given the difficulties of passing through higher input costs to final demand sectors..

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