Call it destiny or plain arithmetic, aluminium’s decarbonisation story now hinges on energy prices. The Hall-Héroult smelting process is evidently electricity-intensive, so swings in oil, gas, coal and (crucially) electricity prices feed directly into producers’ margins, and definitely into the calculus for switching smelters to renewables or cleaner fuels.
Starting with the numbers
The IEA’s World Energy Outlook provides the baseline price paths used by markets and planners. Crude oil averaged about USD 79 per barrel in 2024, and under the IEA scenarios, oil will range roughly between USD 33-106 per barrel by 2035, depending on the policy pathway (Stated Policies Scenario vs Current Policies Scenario vs Net Zero Emissions).
Natural gas shows stark regional spreads in the WEO benchmark table. For 2024, the US Henry Hub equivalent is USD 2.2 per million British thermal units (MMBtu) versus USD 10-13 per MMBtu in Europe/Japan.
And the IEA projects those regional patterns to persist under different scenarios. Steam-coal import prices also diverge heavily by market (coastal China, EU, Japan). These calibrated scenario numbers come straight from the World Energy Outlook’s prices section.
The IEA’s three-pathway price outlook
Under the Current Policies Scenario (CPS), crude oil is projected at USD 106 per barrel by 2050, European natural gas at USD 10.6 per MMBtu, and Chinese steam coal at USD 105 per tonne, effectively baking in sustained energy inflation for smelters running on fossil-heavy grids.
Even the more optimistic Stated Policies Scenario (STEPS) keeps oil at USD 76 per barrel, EU gas at USD 8.4 per MMBtu, and Chinese coal at USD 84 per tonne, levels that would preserve today’s regional cost asymmetries and keep European and Asian smelters structurally disadvantaged against producers plugged into low-cost hydropower or subsidised renewables.
It is only in the Net Zero Emissions (NZE) pathway that fossil benchmarks collapse. Oil sinks to USD 25 per barrel, EU gas to USD 4.0 per MMBtu and Chinese steam coal to USD 49 per tonne. This is not a cheap-fuel renaissance but a world where demand destruction, electrification and renewables dominance hollow out fossil price power altogether.
For aluminium, this is the real sustainability inflexion point. If NZE-like dynamics prevail post-2026, fossil fuels no longer set the marginal cost of metal; electricity sourcing does. Regions accelerating the pivot to firm renewables, India with its rapid solar-plus-storage PPAs, Southeast Asia with new hydro and offshore wind corridors, and China with grid-scale clean-power integration, are poised to rewrite the industry’s future competitiveness map.
But after all, to prepare better for any of the future scenarios, we ought to take a step back.
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What actually happened in 2025, and what matters for 2026
After a volatile 2021–24, energy prices stabilised into 2025. Global investment into clean energy surged (WEF estimates global energy investment passed USD 3.3 trillion in 2025, with roughly USD 2.2 trillion to clean tech), which is shifting supply fundamentals for power-sector fuels and technologies.
Meanwhile, the U.S. Energy Information Administration forecasts the Brent crude oil price to average at USD 56 per barrel in 2026, 19 per cent less than the previous year, and then further dip to USD 54 per barrel in 2027.
According to their forecast, global liquid fuel production will rise by 1.4 million barrels per day in 2026 and 0.5 million b/d in 2027. Global liquid fuels production growth in 2026 is driven by crude oil production growth in OPEC+, while production growth in 2027 is driven by countries outside of OPEC+, primarily in South America. Our forecast assumes existing sanctions on Venezuela remain in place through 2027.
Why would that matter for aluminium? The industry’s highest recurring cost is electricity. When regional gas or coal prices spike, smelters in those markets face immediate cost pressure and greater impetus to seek lower-carbon, lower-cost power contracts, whether via long-term renewable power purchase agreements (PPAs), captive hydro, or firmed renewables plus storage.
To put a rough number, electricity is a massive cost for aluminium smelters, typically making up 30 per cent to 40 per cent (or even more) of total production costs, with some sources suggesting it's a dominant factor alongside alumina (around 60 per cent combined), while others note it can reach up to half the cost depending on power prices, with smelters often located near cheap hydropower.
Region by region, the shift is already visible
China remains the world’s dominant aluminium producer and a huge electricity consumer, but the WEO highlights a long-term pivot in the geography of demand toward India and Southeast Asia (new growth centres).
China’s power mix improvements and continuing renewables manufacture mean Chinese producers can access cheap, clean electricity domestically — yet policy and grid constraints still shape how fast smelters decarbonise.
India & South/Southeast Asia are where the market growth and the green procurement story collide. The IEA and market reports flag India and neighbouring markets as major recipients of new LNG and electricity demand growth.
At the same time, industry studies (and local consultancy work) show aluminium players in India are actively securing solar PPAs and captive renewables capacity — India’s aluminium sector has deployed hundreds of MWs of renewables capacity and is rapidly expanding green procurement programs to lock in lower and greener power.
Europe & Japan have high industrial power prices and meaningful ETS exposure, making low-carbon electricity a competitive advantage. European smelters are pushed toward guaranteed green grids, contracts with storage or firmed renewables, or location moves to lower-cost hydropower sites. WEO price scenarios show EU gas and coal prices materially higher than US levels, reinforcing this dynamic.
North America witnesses relatively low wholesale gas (and by extension some power) prices, giving US producers a near-term advantage, but rising electricity demand (EIA flags record power use into 2026 driven by data centres and electrification) could tighten markets and nudge aluminium producers toward firmed renewables to lock in future cost certainty.
Beyond fuels, metals and clean-tech input prices matter, too. WEO notes base-metal prices (including aluminium) rebounded into 2024-25 while many battery-metal prices fell with new supply — a reminder that the supply-side of critical inputs can swing costs for decarbonisation technologies that aluminium makers buy (e.g., for electrolyser or storage projects).
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The near-term outlook: What to expect in 2026?
The short, practical take is moderate relief but a growing premium for green certainty. Short-term forecasts (EIA & market reporting) point to softer oil and stable-to-slightly-lower gas into 2026 compared with 2025, which will temper fuel-driven cost shocks, but structural forces — massive clean-energy investment, regional LNG build-out, and rising carbon policy coverage — are reshaping the risk-reward for aluminium producers.
Firms that lock in long-dated green power or invest in captive renewables and storage will both lower volatility exposure and capture an emerging market premium for lower-carbon aluminium demanded by auto and packaging buyers.
The 2025 price landscape made one thing clear for aluminium: decarbonisation is rapidly becoming a cost-management strategy. Regions that combine affordable, firm clean power with industrial policy support (think smaller clusters of India, SE Asia, hydro-rich hubs like Norway and other parts of Europe and Chinese manufacturing clusters) will be the winners.
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