European aluminium production cut already exceeds 1 Mt, likely to downsize further in winter

The Ukraine-Russia conflict has caused relentless aluminium production cuts at European smelters this year. In addition, the indefinite suspension of the “North Stream No. 1” gas pipeline in Russia, coupled with the electricity price surge, has worsened the situation further. It is reported that the largest aluminium smelter in Europe will step up its output cut next week.

European aluminium production capacity cut has already reached beyond 1 million tonnes to date and is likely to be reduced further before winter. But due to relatively a smaller size of production capacity of about 4.8 million tonnes in Europe, the output cuts have had limited impact on the total supply so far, resulting in global aluminium price boost.

Since the electricity supply in Europe is primarily dependent on natural gas generation, Russia’s suspension of gas supply creates a havoc effect on European electricity supply, leading to a price hike.

In recent time, Aluminium Dunkerque, the biggest smelter in France, announced to curtail production by one-fifth of its capacity to battle rising energy prices in Europe. Speira in Germany has decided to halve its aluminium production at Rheinwerk smelter in Neuss until further notice. The curtailment process will start in early-October 2022 and will likely end in November.

Besides, Alcoa’s aluminium smelter in Norway will reportedly cut output by one-third, while Norsk Hydro plans to close its smelter in Slovakia.

The current electricity price in the French spot market soars to 626 euros/MWh, nearly three times higher than the previous record price of 257 euros/MWh on February 1, said Wang Yanchen, general manager of SMM’s London office.